To answer your questions, while some traders are more flexible with their trading plan, targets, stops, etc.. It is probably best for most to just tune out all the noise and try not to second guess your position once entered based on other variables that may or may not impact it. Best in most cases to stick with your trading plan (targets, stops, etc..) unless something substantially has changed in technicals for that position that prompts you to either close the position early, be it at a loss or profit, OR to extend your profit targets, for example if the charts on both the position & underlying sector have become increasingly bullish since taking the position.

Probably the best route for both part-time traders as well as those that struggle with discipline & patience would be to place an OCO or OCA order immediately after entering a position. Those are orders in which you set your profit target (sell limit) and your stop-loss order. 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.

Just read your long reply. Now I feel guilty for making you write all of that LOL! Great commentary as usual though, and much appreciated. I do realize this is all just calculated risk/reward and very technical in nature (as well as the need for individual due diligence)… You have an excellent track record with these.

I guess what I was trying to communicate is that, for the folks who may hold on to something like this longer term (beyond stops, in hopes for that giant dividend) the “income” part of this may not in fact be income at all. The old value trap / “reaching for yield” in ZIRP environment mentality, which I’m sure you’re very aware of, although some others may not be. Anyway, I certainly didn’t mean to question your credibility or ideas as I feel you’re probably one of the best out there. ;) Thanks Randy!

While I do often harp upon the fact that breakouts that occur on 1.5x or greater the average volume have considerably lower chance of the breakout failing, I’ll have to leave it up to each trader/investors to decided whether on not to take a breakout that is tracking at average or below average volume. Typically, such as with this WMB trade setup, I will adjust the entry price to slight above the actually breakout level in order to minimize the chances of taking a breakout on a brief pop a penny or two above the resistance level without any follow through buying.

e.g.- The most significant technical level,likely to spark a breakout if cleared on WMD is last Friday’s reaction high of 16.75. That reaction high occurred on a test of the downtrend line with prices immediately reversing. As downtrend lines have a negative slope, the next time WMB clears the 16.75 level, it will also have cleared that downtrend line. However, when looking to position on a breakout of of any key technical level (TL, horizontal resistance, reaction high, etc..) I will always scrub the chart to make sure that there aren’t any other potentially significant resistance levels just overhead. If so, I’ll hold off on taking a position until/unless that level(s) is also cleared. In the case of WMB, that horizontal resistance line just above is actually at 16.94. Therefore, I’m allowing for a 4 cent buffer to help reduce the chances of taking of whipsaw signal, should prices just pop a penny or two above that level before reversing.

To further reduce the odds of buying into a false breakout, here’s how to estimate how a stock is tracking compared to its average volume shortly after the breakout has occurred vs. waiting to see the end of day volume totals:

Tracking volume at any point during the trading session = total volume up to that point in the day divided by the # of hours elapsed into the trading session X 6.5 (which is the number of hours in a trading session).
e.g. If a stock has traded 1M shares at 11:30am ET, you would divide 1m by 2 (hours since the open) to get 500k then multiple that by 6.5 to get 3.25M (for an estimate total volume for the day based on how it is tracking so far). Compare that total to the 90 or 100 day average volume & ideally, the breakout should be tracking at 150% or more of the average.

@lee1– Just to make sure that you saw my revised reply to your request for clarification on the entry price, I had to edit my previous reply to you as I fired off that response too quickly before double-checking the chart. To clarify, the entry criteria will be on any print of 16.98 on WMB, which will have taken the stock above both the downtrend line & the 16.95 horizontal resistance level.

(edited with corrected entry criteria): lee1- Entry to be triggered on any print of 16.98 (i.e.- a break above 16.97, which is above the downtrend line and 2 cents above the horizontal resistance level). Thanks for clarifying as I know see the typo that I made accidentally listing 16.80. I’ll correct that asap.

trqfunds- Great point & although I touched on that in my closing notes on WMB, I think what you bring up is worth expanding on as well as a segue into a few closely related points that I would like to share. As my reply & additional comments will be lengthy, I’m going to address it in a separate post later today.