I am putting this post in the ‘trading flashback’ category. It is a category where I look back at trades I have talked about and try to introspect as to why they either failed or succeeded.
I first mentioned CORS Corus Bankshares on August 12th in the evening. It was trading at .33 cents at end of day August 12th. Today we hit an intra day high of .65 or almost a full 100% move in just two days. Clearly this is the power of penny stocks and outsized potential returns, but with added risk.
On my first post on CORS I said and I quote:
First CORS needs to get above .33 and close up above that level. I would prefer to see a full price bar above .33 as a signal that a big pop could start. I think we have a good shot at the beginnings of a breakout type move tomorrow and then maybe a low volume pullback Friday, and then the real run early next week sometime.
As it turns out the run did not wait until next week.
I would describe this setup as ‘decent’, but certainly not perfect. It was good because it had a somewhat saucer shaped bottom formation (see drawn in red line). It was also good because the heavy volume of the last 6 days or so was much higher than average AND it was occurring under the longer term resistance line. I like to see that because it is evidence of building pressure under a resistance area and can lead to big moves.
It is a bit curious how heavy the volume was today and while price had a big move it was no where near what it probably should have been given that volume. Also CORS has a mid range close today which is evidence of supply coming in. Clearly the time to have exited this trade would have been today.
CORS has quite a heavy short position and that helped fuel part of the move today.
The nice thing about the CORS setup was that it happened on the same day the DOW was down 150 points. But the general market weakness probably helped to give CORS a mid range close. But the CORS setup is a great example of how individual stocks can move on their own time clock regardless of what the ‘averages’ are doing.
There was another little hint on the CORS trade that helped to give it a higher probability. A similar bank stock with symbol GFG had a big breakout a couple days before CORS. It can be very useful to see what other stocks are doing within an industry sector as a clue in determining if they might do the same. Google finance has a nice feature to help with this. If you go to google finance and type in any stock symbol, it will show you at the bottom a bunch of symbols that are in the same industry.
Hey there,
I like your post and how you analyse it!
but do you think now that CORS will open higher on monday and how are you going to play it next week??!!
especialy with the very bad news failur bank of Colonia!!
Goodluck to all!!
Hi Dreamony,
Thank you for your comments.
Before I answer I would say in general that I recommend anytime a trade moves over 20% or more in a few days or less to lock in profits or at least partial profits
immediately
. 100% trades in 2 days is not real, it just doesn’t happen that often so one should take the money and run. Another alternative is to set a % trailing stop so you get most of the upside and then get taken out automatically. CORS has more than adequate liquidity so stops are not a problem on this type of trade.
It is very very difficult to predict one or two day moves following breakouts or following any type of wide price spread. Volatility reaches peak levels and price moves can be violent in either direction.
But I will take a shot at it anyway.
We had a mid range close, so that is indicative of plenty of supply coming in. So it is a hint to me that it may be difficult to get sufficient follow through early next week right away. Also the volume was absolutely record volume, almost blow out type volume and I can tell you from experience that it is usually very difficult to maintain that level of volume on the succeeding trading days and that usually means price consolidation instead of continuation breakout. This is especially true for a slow trading Monday that begins the week and in the dog days of August.
On the bullish side I can say that RSI (Relative Strength Index) has just entered the power zone right at the 70 level and you could see a gap up, then follow through, but then an intra day reversal back down into the .60 cent range.
Another possibility which is a very common occurrence is a retest of the breakout level and longer term support which in this case would be the .33 cent level.
If I was still in this trade I would be looking for a clean exit sometime on Monday and probably pretty close to the open. If CORS is lucky enough to get a quick move up or a small gap up into the .60 area, and then starts stalling, it would not be a bad time to bail. I can project an RSI peak value based on price and it tells me that it is very very improbable that CORS will be able to extend farther than .75 to .80 cents on Monday if it decides to get a continuation spike. So if it does get up there it will probably do an intra day reversal to start a retracement process the rest of the week.
It is really a quick judgement call that needs to be decided on Monday in the am. There are many factors happening all at once that will make the determination.
Good Trading to you.