By now you are more than likely aware of the term “Odd Lot Theory” the title of this lessons is as Odd Lot as they come and you will find out why by the end.
We all were aware of the $60 level in LITE however given the run it had and how wide it trades. I was looking for a tighter spot to get in and found one after it failed at the $60 level and pulled in for 3 days putting in a Doji at lows (cue up The Doji Buy Back lesson) now if you peep the chart below. This entry looks oddly similar to the MELI buy into support.
“We learn so much from mistakes, it gives you loud signals, you don't grow from success it's what keeps you doing it” Ray Dalio
Similar to the MELI support buy, with LITE I too was just a tad too early (sound familiar), that is why we focus on buying on the way up with the trend instead of trying to catch support. However sometimes we need to try new things like the hot sauce from the Halal Trucks on East 56th.
A recurring lesson that I need to fix was just like MELI, I was too early however it held that next level of support and offered a great low risk entry. Same with LITE I was wrong quick as it pulled in 5% in two days. Now hindsight is always 20/20 however the retest of support is usually the highest probability of it working. In August when LITE free fell from $64 to $50 it was hard to say that was the low until after the fact (hindsight). The first retest however it's much clearer with a defined out, now if it got back down to $50 a 3rd or 4th time the trades fucked. Rookies are the heroes who try and call bottoms, professionals trade near the rest test of support. Pack your big boy pants though, buying into support is no Central Park stroll on an August evening and avoid the junkies (trying to buy the 3rd, 4th time plus times into support)
Chipotlaway lesson can help you with that one.
Paralleling MELI to this LITE trade and learning my lessons from The Round Trip lesson I knew I add to add back up through a set up. I didn't have the balls to average into a loser, however I will add back up when I’m flat and the name is flagging. First buy was $55 into support, sat through some pain, and added back up through $56.
“Memory is best reinforced by repeated exposure” Trading Experts
After the add, we got an inside day, and then the next it finally goes, now could I have added again? Probably right? Note taken. So we catch a quick pop however it still seems their is a $60 seller that doesn't want to let up just yet. After the next day you can see that doji at highs, time to take profits and take off the $56 buys. The next day it still couldn't break that $60, took off most of the $55 buys. Now the real level was $60 so if I wanted to kick these $55 and $56 buys in front of $60. I had to buy this fucker back through $60 no matter what.
“The tighter the level the more valuable the add” Trading Experts
So what happens, it ticks $60.10 and gets me in, only to do the same song and dance, pull right back in a fast $4 bucks. Now I’m starting to get a feel for how the name wants to play. One day the coolest chick ever, next day she’s slashing your tires.
From the get go I was playing defense against LITE, first buy was wrong, second add was ok, locked in some profit on a pop in front of resistance. However now I have an even worst price in the process, sure some PnL locked in but still looking at a sea of open red PnL. If this was a boxing match, I was definitely getting my ass kicked for the first few rounds.
Now this was my time to turn this franchise around. We can see how this $55 area has been somewhat of a battle ground and LITE is a pretty wide name intraday. On the day in question when it ripped, for the first few hours of trading it was the smallest doji day for this name in the longest time.
$1 risk in a name like LITE with a well defined out? Time to add back, and it ripped closing near the high of day in front of mother fucking $60. Now I just bought $60 2 days ago, and got a sick price on my add, just like the $56 add that I didn't add more, learning that lesson, as shitty as it was I had to buy $60 again.
Now if you say it outloud “Buy, Add, Kick... Buy, Add, Add…. Kick, Kick”
Sounds like a boxing match right? Just you and the stock battling it back and forth. I’m not waiting for the one knockout punch to top tick LITE at $1,000 and retire on a beach, I’m looking to jab and duck, regroup, rinse and repeat.
Knowing this name or any name for that that matter when you get these vertical moves you have to lighten the load ($55 to $65 in 24 hours). Took off the $60 buys in front of the $64 level (sell the shit stock first), and held the $55 stock, now its still flagging and lock sick through $64 however as history tends to repeat itself it will probably need time to digest the move. How tricky was that $60 level, who is to say $64 will be a fun stroll through central park on a summer evening? It will probably be more like leaving your Aston Martin running outside of a liquor store in the ghetto.
One of the Alpha members had said that I made LITE my bitch, think it was T Fresh, because they remembered the most recent call from $56 before it ripped 13% in 2 days however I was battling that name all month and finally got her on the ropes.
It was by no means LITE work, it was fucking hard work as trading tends to be. I will buy through $64 and within a year LITE should be an $80+ stock, the million dollar question is how it gets there and how long can we ride it.