Jan 052015
LL daily Jan 5th

LL daily Jan 5th

LL (Lumber Liquidators Holdings) is a good example of technical analysis and bad example of hastily determining stop levels while rushing to post a new trade idea.

The Good: LL was first posted as a short trade idea back on Nov 22nd with an aggressive entry around 114 or a more conservative entry on a break below 109. From there, the stock proceeded to plunge nearly 60% to the potential 3rd & final target. By the time I received an alert that T2 (the official final target at the time) it was too late to extend the final target to T3 as most standing buy-to-cover orders would have already been filled. From there I watched the stock and waited until the T3 level was hit at which time I had also been monitoring the development of a bullish falling wedge pattern, complete with strong bullish divergences in place on both the MACD & RSI (as highlighted in the previous post).

The Bad: In my haste to mock-up the chart, compose my notes & post the trade idea in asap, I quickly made the decision to use an overly aggressive stop of 48.60 which was essentially right on or only slightly below the actual support/reversal level that I was originally targeting for the third and final potential target on the previous short trade. As such, this trade slightly exceeded the previously suggested stop criteria. This overly aggressive stop provided a very attractive 6.5:1 R/R (risk-to-return ratio) to the stated preferred target of 69.55 but again, the stop should have been placed low enough to provide a slight overshoot of support (something very common when a stock approaches a support level during a strong downtrend).

The take away from this is two-fold: 1) Suggested stops and profit targets are just that; suggestions. Always trade according to your own personal risk tolerance & stop parameters. 2) For those still long LL, consider booking full profits or at least raising stops as prices are now just below the bottom of the July 9th-10th gap where LL is most likely to find considerable resistance, especially as the stock has gained about 41% since the long entry from Oct 22nd. As such, LL was be considered a completed trade (technically, stopped out for a loss due to the previously stated suggested stop criteria). Congratulations to those that allow a more reasonable stop buffer & were able to capitalize on this trade.

Oct 222014

LL (Lumber Liquidators) was a recent Short Trade idea that hit the second target for a 38% gain back in July. I had discussed the likelihood of extending the final target to T3, which was listed as the potential final target on the previously posted charts. However, LL hit the second target before I had a chance to make that official and so I had to go ahead and consider the trade completed when T2 was hit (as it was too late to make T3 the final target). Fast-forward to today & LL has finally reached that T3 level, which is the level where the R/R no longer warrants remaining short (for those that held) as the odds for a reversal are quite elevated at this time. Final targets are set at the level where the R/R no longer warrants holding the position & more often than not, a substantial & often lasting reversal in the stock is expected.

As the updated daily chart (second chart) below shows, LL is trading at the bottom of what appears to be a bullish falling wedge pattern complete with positive divergence forming on both the MACD & RSI, all while trading just above that key horizontal support level (the previous third target). With the current near-term & intermediate-term trends still bearish for now, I'm still considering long trades as counter-trend trades until/unless the charts say otherwise. I also have some concerns about LL as there is a thin-zone just below the T3 support level which runs down to about the 34.25-34.10 level. If LL were to make a solid break below T3 (about the 48.90 level), there's a good chance that the stock will back-fill that thin zone. Counter-trade or not, I'm looking for some new long trade ideas for both hedging exposure (for those positioned net short) as well as for those traders position net long, with a longer-term bullish outlook.

With that being said, LL offers an objective long entry here around current levels (51.40ish). This holds especially true for those with a longer-term bullish outlook who believe that this most recent sell0ff is over and the markets are headed much higher. My first target would be the former T2 level, with the actually target set just below the bottom of the July 9th gap at 69.65 (target = 69.55) with a suggest stop on a daily close or solid move below 48.60.

click here to view the live, annotated daily chart of LL

Jul 092014
LL Final Target Hit July 9th

LL Final Target Hit July 9th

The LL (Lumber Liquidators) short trade has hit the final target, T2 at 71.72, for a 38% from the original entry. LL was first mentioned as an aggressive entry as it was just breaking down below its 2-year primary uptrend line on the morning of November 22nd (trading around 114 at the time). I also listed a second add-on or more conservative entry on a break below the 109 support level, which the stock also went on to trigger later that same day, providing a 34.2% gain based solely on that entry level (and about 36%, if taken in tw0 equal lots at both entry points). The possibility of adding a third target target level around the 49 area was previously discussed but as I did not make it official before this 2nd & current final target was hit, I will consider T2 the final target and LL will now be moved to the Completed Trades category where all associated posts on this trade will be archived for future reference.

LL is one of many trade ideas, both long & short, that have remained in the Active Trades categories for many months now. Unlike LL, which never exceeded any suggested or reasonable stop (always trading below the original entry point since the inception of the trade), there are quite a few old trade ideas that have either exceeded their previously suggested stop criteria or any reasonable stop criteria, if none suggested. I do plan to clean up the Active Trades category this week by removing any stopped out trade or those that no longer look very attractive & I will also continue to scan for any new trade ideas offering the most attractive risk/return profiles. As always, if you have any questions or comments with any of the trade ideas or market analysis shared on RSOTC, please don't hesitate to contact me.

Dec 102013

LL daily 12-10-13The LL (Lumber Liquidators Holdings) short trade has hit the first target of 91.25 for a gain of 18.2%.  T2 at 71.72 remains my current final & preferred target although this trade may still be extended to the 49 area, should the trend indicators on the broad market start to roll over soon.  Updated daily chart shown.  Click here to view the live, annotated chart.

Admin note:  A feature will soon be added to Right Side of the Chart allowing those subscribed to receive email notifications of new posts to select which specific categories they wish to receive email notifications on.  For example, long-term swing traders and investors might choose to only receive notifications when a new Long-term Trade setup is posted while opting out of receiving notifications of completed trades, market analysis, etc...  This new feature is expected to be rolled out within the next week.

Nov 242013

LL daily 2This is a static daily chart of the LL (Lumber Liquidators Holdings) short trade idea mentioned on Friday morning as well as a link to the live, annotated chart.  Suggested profit targets are T1 (first target) at 91.25 and T2 (second target) at 71.72 with a potential, but not current, third target around the 49.00 area.  As various entry criteria were suggested for this trade, stops should be set according to one's unique entry price(s).  LL remained below the primary uptrend line/breakdown level following the post on Friday morning, trading around 114 at the time of the post and then started to fall sharply just before noon EST on the news that Whitney Tilson of T2 Partners was short the stock (a well timed and probably not purely coincidental press release as the stock had just broken major support with strong bearish divergences in place on the chart).

As usual, the odds for a reaction (bounce or consolidation) off the first tag of T1 is likely so at this point, anyone who missed an objective entry on Friday might wait for either a bounce towards at least half-way back to the trendline before adding to or initiating a short position OR wait until the stock makes a solid break below the T1 level, preferably after a decent bounce or consolidation off that level.  Click this thumbnail image to view the static chart as of Friday's close or click here to view the live chart of Lumber Liquidators.

Nov 222013

I will be away from my desk for most of the day and might post some charts or commentary later today, should we get any significant technical developments in the market or with an of the active trade ideas.  We did have a couple of trade ideas hit profit targets recently, which I will post updated charts on asap.  The ZNGA long trade hit the first profit target of 4.43 yesterday & the HSOL short trade hit the first target of 3.40 shortly after the update on that trade (with the target level added) was posted.   From a quick glance at my watchlist, I can see that the SPLK short trade has gapped up, exceeding the suggested stop.  SPLK was recently added as a short setup or active trade with an aggressive entry on Nov 8th or to wait for a break below the 59.50 support level, which never happened as the stock found support just above that level yesterday and followed up with the large gap today.  Anyone who took the aggressive entry & still holds a short position might consider a stop above the current HOD at this point, which is 74.45, trailing your stop lower should the stock fail to build on today's gains.

There may be a couple of other trade ideas that have hit a profit target or exceeded their suggested stop(s) which will be updated later today or over the weekend.  There are a few new setups that might be added once the current trade ideas are updated.  I did receive a price alert on LL as a possible short entry as the stock has broken below the 2-year primary uptrend line generated off the Dec 19th lows (use a log-scale chart setting).  Exact targets & stops TBD but the first target would be just above the 90.90 area with a second target around 71.70ish.  Of course the trend is still very solidly bullish with a strong bid beneath the market so although we've had many successful short trades recently, shorts remain counter-trend trades at this time and as such, sell signals such as intraday breakdowns below an uptrend line or bearish price pattern are prone to an above-average rate of failure (false sell signals).  Therefore, waiting for a daily close below support, especially on a swing trade with fairly large profit potential such as LL, would be a prudent strategy for all but aggressive, nimble traders.  LL also has decent horizontal support at 109.  As such, one might wait for a break below that level before shorting or bringing the trade to a full position.  Chart to follow later.