Three of the 10 survivors from my initial screening, see "Thursday's Prospects" posted last night, failed confirmation today.
One, CWLR, had a huge gap up because of a buyout offer, the sort of news-driven drama that I won't trade because, after all, the cat is out of the bag and subsequent price moves will be driven more by behind-the-scenes negotiations rather than by the consensus of traders.
Of the remaining six, LG and LPNT had options with open interest too low to meet my requirements, CPHD had only even odds of success in its current trend, and LXRX had a negative win/lose yield spread.
I considered CNO because of its excellent odds, 3:1, and an impressive 14.9% win/lose yield spread. Actually, I had started writing up an analysis. But in the end, I decided that the options grid would be difficult to work with because of the distribution of open interest.
The final possible trade, CFN, has the options liquidity that I need, but it rose 5.5% on its breakout day and another 3.6% to hit its high (so far) today. That's a lot of upside movement in a short time that is bound to produce a downside reaction. It's not a rule that I reject trades like that, but I decided to in this instance. Call it a hunch.
My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.
At several points in my analysis I use the number 68.2%. This comes from statistics and refers to the one standard deviation boundaries, which are expected to contain 68.2% of whatever is being studied. Putting it another way, given an item (a trade or whatever), there is a 68.2% chance that it will appear within those boundaries.
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.