Example Trade 2: Career Education (CECO)
Here is another example trade using the Traders Action Zone strategy. This trade did not go in my favor, which is why money management is so important to swing trading.
Here is a swing trade that did not go in my favor.
This is how it unfolded...
On July 12th the S&P 500 was overbought:
After running a scan near the end of the day, I came up with Career Education Corp (CECO). What a beautiful chart this was! Take a look:
CECO was up against resistance and an upper trend line. Then it formed a bearish candle after four consecutive up days. And, it was reversing near the 50 percent retracement level. Plus, it had relative weakness compared to the S&P 500. Not only that, but the hourly chart was perfect!
Here it is:
There is a double top chart pattern at $25. This was an ideal stop loss area. If this stock moved above this area then the trade would be invalid. So, I shorted CECO near the end of the day.
This stock had everything going for it. And, it was a perfect set up. But, trades don't always go in your favor - no matter how good the set up looks. Here is what happened:
This stock moved above the double top ($25). There is always an area on a stock chart that invalidates the set up. In this case, that area was the double top chart pattern.
So, I got stopped out for a loss.
There are three things I know about swing trading and the stock market:
- You are doomed without a money management strategy.
- Chart patterns can and will fail no matter how good they look
- There will ALWAYS be losing trades.
That knowledge is what has kept me in this game for so long.