Humana Trade

[Matt Bowen]

Last week on Monday's Close we had a TS1 Buy Signal for Humana (HUM) at 31.79 As we continue to manage the position we would like to see the stock close above 2-3 Profit Area (Blue Box). If the trade can close above the 2-3 Profit Area we can then manage the trade with our trade management rules:

http://www.mtpredictor.com/pricing/EODFigures4.html

[stevej]

Matt,

My scan shows the following prospects for last Monday:

Short BMC R/R 4.6:1 - Currently showing loss but not stopped.
Long CCU R/R 3.5:1 - Stopped out for loss.
Long CHIR R/R 5.7:1 - No entry prior to continuing to fall.
Long FRE R/R 2.2:1 - Stopped out for loss.
Long HUM R/R 2.8:1 - Trade in question.
Long KSS R/R 2.4:1 - Stopped out for loss.
Long ODP R/R 4.3:1 - No entry prior to continuing to fall.
Long PHM R/R 2.4:1 - Currently showing loss but not stopped.

Why select HUM as trade of the week?
What were the factors that made you take the HUM trade and not the others?
Am I correct in thinking HUM was at Min Wave C not TYP Wave C thus not strictly in accordance with published criteria? IE it would not be found in the scan set out at http://www.mtpredictor.com/pricing/EODFigures4.html

Assistance appreciated

SJ

[Matt Bowen]

Hi Stevej,

Thanks for the questions:

Why select HUM as trade of the week?

Obviously the Humana trade worked out and I wanted to show people a trade that worked, but more importantly how to continue to manage the trade once it became profitable. After teaching traders for over 11 years I've found that most traders sell winning trades first and then ride losing trades into the ground, which is exactly the opposite strategy needed in order to win at trading.

What were the factors that made you take the HUM trade and not the others?

I didn't just take the HUM trade...you have to take all the trades because unless you are
Nostradamus, you will never know which trades are going to work. It's the same reason I tell
people: You will run out of capital before you run out of trades... People are always focused on "How many winning trades did you have or Does it win 90% of the time" These questions are what get people into trouble. Why? Because it only takes one good trade to pay for a weeks worth of losing trades if you use proper risk control...ride winners, cut losers!!!

Am I correct in thinking HUM was at Min Wave C not TYP Wave C thus not strictly in accordance with published criteria?

If you go back to the 4/22/05 you will see the Min. Wave C was hit intraday and thus good enough for me. The word guidelines (to me) means on or about. It kind of like a 1.9 Risk to Reward setup... True it's not 2 to 1 like the "guidelines" call for, but that does not mean it less likely to work...it just means more risk associated with the trade. In other words, if you wait for EXACTLY THE RIGHT TRADES you will miss some otherwise great moves. Pristine setups don't always yield the best returns, in fact I've seen a lot of 2 to 1 trades out perform the 5 to 1 or even greater setups.

Managing a portfolio is a lot like taking out the trash...you keep the good stuff and take out the bad stuff.

I hope that helps,

-Matt

[stevej]

Thanks Matt.

Prompt and helpful as ever

[SandyZ]

Hope many of you caught the WFMI and RIMM trades in the EOD scanner. If I knew how to post a chart I would but check out the move. The trigger on RIMM was at 65.40 on 5/2 and on WFMI 4/26 at 98.18.

Thanks Steve for a great program!

Sandy