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DLB Trade Setup Entry Price Triggered

The DLB (Dolby Laboratories Inc) short trade setup has triggered an entry on this break below 49.31, a level that was set comfortably enough below the rising wedge to help minimize the odds of a whipsaw signal/false breakdown. Price targets remain T1 at 46.85, T2 at 45.07 & T3 at 42.30 with a maximum suggested stop over 50.83.

DLB daily Aug 30th

DLB daily Aug 30th

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Aug 30, 2016 12:23pm|Categories: Completed Trades - Short|Tags: |10 Comments

10 Comments

  1. Dazi August 30, 2016 12:58 pm at 12:58 pm

    @randy, When the stock keeps falling…now 49.05…is it still safe to enter? How do you treat this issue…wait for a pullback against the MA, or just get in as one can?

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    • Dazi August 30, 2016 1:08 pm at 1:08 pm

      Well…good, bad, or…I am in at 49.08; hope it works out.

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      • rsotc August 30, 2016 2:57 pm at 2:57 pm

        Dazi- FWIW (and in regards to your previous question as well), I think 49.08 was still an objective entry. For that matter, with those ‘Big 5’ top components of the $NDX that I’ve been highlighting in recent weeks (AAPL, GOOG, MSFT, AMZN & FB) continuing to move lower following the divergent highs & support level breaks that I highlighted on their 60-minute charts, it appears those key supports of QQQ 116.00 & SPY 215.30 are still likely to give way sooner than later which, if so, will most likely open the door for a move down to at least T2 (45.07) on DLB.

        If so, one could even still short it here (48.84 as I type) or down to around the 48.50ish level & still have a decent R/R on the trade. However, if shorting much lower than the entry price of 49.30, one might consider using stop that much below the suggested stop or more importantly, a stop calculated using a R/R of 3:1 or better to their preferred price target. T3 at 42.30 remains the final target but the chances of DLB reaching that target is largely predicated on my expectation for if & just how much the broad market is likely to correct soon.

        It is not unusual for me to revise a trade by either closing it out before the final target or extended the final target, if the outlook for that trade and/or the broad market (or the sector in which it is in) changes while the trade is still active. As of now, T2 is my preferred target, where I will likely cover some or all of my DLB short if it gets there although I will likely hold out for T3, should the broad market break those support levels and begin to move impulsively lower soon.

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        • Dazi August 30, 2016 3:41 pm at 3:41 pm

          ThankYou for your reply, Randy.
          This is the first *short* I have ever executed.
          Now…soon…I must learn how to place the stop, as I understand it, simply a buy/limit order at the chosen/protective price.

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          • rsotc August 30, 2016 5:05 pm at 5:05 pm

            Dazi- Good luck on you initial venture into short selling. Regarding the stop-loss order and probably just as importantly on short-trades, as they can reverse as fast as they fall once the target is hit or their correction is over, I would definitely encourage the use of OCO (one-cancels-the-other) aka OCA (one-cancels-another) orders.

            Those are orders in which you set your profit target (sell limit) and your stop-loss order on the trade at the same time. When either order is hit, the other order is automatically canceled. A simple set-it-and-forget method that helps to add discipline as well as a useful tool for those that don’t have the luxury or desire to sit in front of a computer every day during market hours. OCO’s are probably the best way to take out a lot of the emotion in your trading as you place the order immediately after entering the trade & then wait patiently until you are either stopped out or your profit target is hit.

            I doubt there is a broker today that doesn’t offer OCO/OCA orders. They might be accessed under something like “advance order types” in your trading platform but just call your broker & I’m sure they will walk you through the steps to entering those order types. If you’re somewhat computer savvy, you can probably search their website to find the instructions & details on those order types as well.

            With an OCO/OCA order for DLB, for example, you would place one order to ‘Buy-to-Cover’ XXX shares of DLB at a “Limit” of 45.07 (assuming your want to cover at T2) and another order to ‘Buy-to-Cover’ at 50.42* as a “Stop-loss” order (stop-price of 50.42…not a ‘stop-limit’**). Make sure to select “Good Until Canceled” (GTC) vs. the typical default which is a ‘Day” order.

            At this point, one of two things will happen: DLB will either hit your profit target first, thereby cancelling the stop-loss order or vice versa. It doesn’t matter if you are away from your desk & logged off your computer/trading platform.

            *In that example, I calculated a different stop than the official stop for DLB using a 3:1 R/R based on your entry price of 49.08 and the second target level of 45.07, assuming that you might want to go for the higher probability T2 vs. T3 to try to get a winner under your belt on your first short. You can do the same for T1 with even better odds of success if you like. Calculation: 49.08 entry – 45.07 target = 4.01 gain/3 (i.e. total profit potential divided by 3) = 1.34. Then I simply added 1.34 (1/3rd of your profit potential) to your entry price to come up with a stop of 50.42.

            ** I prefer stop-loss orders over stop-limit orders as stop-limit orders can be by-passed, should DLB gap up above the stop-limit price, thereby keeping you in the position potentially indefinitely until you cancel that order & cover the stock at a higher price. Stop-loss orders are automatically converted into a market order (to buy-to-cover your position) once the stop-price is hit or exceeded.

            Let me know if you have any questions. -RP

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          • Dazi August 30, 2016 7:31 pm at 7:31 pm

            Randy – ThankYou for the detailed help with the sell limit and stop loss orders. I tried placing these *Bracket* orders per your suggestions, but did not do so…because the AH Ask price is 52.61 [Bid/47.01]: Too high for a stop loss order, and plan to observe the pre market spread in the morning, to see if it has narrowed, and place the orders in the morning.
            I very much appreciate your guidance and look forward to improving my trading skills by learning from you [& others here].

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          • Dazi August 31, 2016 7:31 am at 7:31 am

            And the bracket orders still haven’t been placed.
            This morning, DLB Bid/0.01, Ask/199,999.00.
            What in the world?
            @Randy, Just spoke w/broker/Schwab, who said to wait until market opens or closer to opening and see then what the spread is. I have my doubts that the spread is going to cooperate.

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          • Dazi August 31, 2016 8:07 am at 8:07 am

            Update: Profit Exit set at 45.07; Stop Loss Exit at 50.42.
            Cooperation!

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          • rsotc August 31, 2016 11:48 am at 11:48 am

            Dazi- Don’t pay much attention to the AH bid & ask prices when the spread is that far apart, which is fairly common on less actively traded stocks. Yes, while it’s preferable to enter your OCO orders during market hours so you can be sure that the stock won’t open outside of your bracketed OCO orders, you can do so before or after the regular trading session but just make sure NOT to select the option to allow the order to be filled outside of regular trading hours. The default on most brokers “should” be that any orders you enter are only valid during the regular trading session but you might want to confirm that.

            Glad that you were able to get the order in place. Again, just make sure that you selected the GTC qualifier or else that order was likely entered as a Day order, which is normally the default setting and as such, will expire at the end of today, thereby leaving you without a stop-loss (or BTC order at your profit target) in place going forward.

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  2. russ66 September 2, 2016 10:52 am at 10:52 am

    DLB: Trading above original entry price today.

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