mysidetrades: Used Pullback to bye GameStop (GME)

Friday, October 26, 2007

Used Pullback to bye GameStop (GME)

I was doing my search off of 52 weeks low and high last night and came across several stock off of their 52 weeks high (ready to move even higher), I am also sharing some of my homework with you, this is a 32% growth stock trading at discount comparing to its next year earning (Got the data from Yahoo finance), so I used yesterday's pull-back and 30Daya MA support as an entry position into this stock. Bought Nov 60 calls @$1.40 (Gamestop Corp. GME). Stock is around $56 and went up $1.2 after Jim Cramer mentioned it on CNBC . This could also have a short term effect to help the stock to break the $60 resistance level.

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My trading rules:

Here are a few trading rules that I found working for me over the past 15 years.
A. Try to follow the steps of the elephants (i.e. big mutual funds and institutions).
B. Its not my goal to predict the bottom for a falling stock or hoping to sell at the top.
C. I will be happy to pick the right stock, make a trade in the right direction, and take profit.
D. Always look for shorting opportunities in the market. Fear is a powerful emotion which can drive the stock price to lower levels.
E. Do not see how one can survive without buying puts to protect against bad market. (well If you have short positions a falling market is a good market).
F. Try to allocate not more than 20% of my trading budget for each trade. Always have 15-20% cash and survive my bad decisions and losing trades.
G. Not in love with particular stock or industry group.
H. Always on the hunt for opportunities in the entire equity market.
I. Step away from battle field. Avoid trading one week before and after earning announcement. Digest earning calls and company announcement before getting into it. When you gamble , the house always wins and you lose.
J. Rapid fire moment, does not lend itself to smart thinking.
K. Pressure is mother-of-all bad decisions, don't pressure yourself.
L. Never kick yourself for taking profit.
M. A money management tip: You get out, when getting is good, before you blow yourself up.
N. Its Ok to take a pass on a trade, listen to your inner Clint Eastwood, "Man got to know his limitations."
O. Assess your down-side before entering a trade, not your upside.
P. Always have 10% of your portfolio in cash, and consider yourself fully vested, if you are below 10%. Need to sell some positions to raise cash.
Q. Have a list of good stocks to buy from, look for pullback and be patient. Not having a list to pick from, is a good indication that you have not done your homework.
R. Refrain from trading on a volatile day, let the dust settle, and let the amateurs play. Enter a position when more odds in your favor. Playing earnings is a dangerous way to gamble.

mysidetrades

Friday, October 26, 2007

Used Pullback to bye GameStop (GME)

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