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1-Week Trade: Short HRL!

2010 - July 14, Wednesday

Ok! I didn’t go workout today. My body was too sore from yesterday’s workout so I took a short nap. =D So I have some time to jot something down. Not much to research tonight either.

We’ve had some nice profits over the last two weeks. I wish I had put more money into work when I first saw the turn two weeks ago. But, I should be thankful: It’s a better feeling than “I wish I had put less money into work”.

It’s ridiculous how all charts have the same pattern. Everything moves in the same direction as everything else. But there are suttle differences in sentiment among various stocks or companies.

Today while going over the charts on my list, I noticed HRL(Hormel Foods Corp.). Technically, HRL looks very strong. The current trend is above both the 200 days and the 50 days. Also, the slope on the 50 days is still positive even after multiple capitulation days.

But HRL is right on resistance. Its stochastics is in the over-bought range and is ready for a turn in the short term trend.

So I shorted it at 42.79 with a stop loss at 42.95. I have yet to see any chart that continues to move higher with this type of configuration. It’ll have to go down a bit and make a higher low to go above the resistance. Essentially, we need a volatility squeeze for the price to move above the resistance.

Where’s my target? It’s at around the 20 days or around 41.84. The risk-reward ratio here is 0.18(=0.16/0.85); the reward-risk ratio is 5.31. It means that I have the potential to make $5.31 for risking a dollar. Mouth watering ratio. mmmm ….

If I’m wrong, I’m wrong. The price I pay is $0.18 a share. It’s not bad for a penalty.

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