Wednesday, 18 May 2016

L Brands Technical Trade

Quick post, I've started keeping a trading journal for the trades I do in my interactive brokers account.

It's a way for me to keep track of my emotions, mindset / psychology surrounding any trading I do.  I try to limit options to a very small %ge of assets.  If I can limit options risk to $50 or $60 per trade, and aim to make 3:1, I will have a viable system over time.

I've been tracking L Brands as it has been decimated recently along with other bricks and mortar retailers. Most recently, same store sales disappointed a few weeks ago, and price did this:

This is a weekly linear chart going back to 2009.  I've drawn weekly support from July 2009 til current.  I note that weekly price is testing support here, and LB reports after the close today.  I bought 1 June $67.50 Call, sold 1 June $70 Call for a net debit of $.60.

Price may very well blow through trendline support to the downside on any further disappointment.  Just because I've drawn a T/L, doesn't mean it will hold.  I do note that sentiment towards retailers is in the toilet, and I wonder if a snap back on the weekly might be be in order, at least up to mid $70's before June options.expiry.  LB broke down sharply from $75 in early May, and technically, broken support often becomes resistance on any retracement (I've drawn a possible price retracement move in green above).

This was a hard trade to put on b/c I was afraid of the idea.  I started writing about the idea of the trade in my journal and came to the conclusion that I should act against my fear here and put the trade on.  It's contra to anything going in retail currently and it's difficult to go against the grain amongst the plethora of retail blow ups.

Risk = $60

Reward on a move to $75 = $2.50 - $60 = $1.90.

If I'm wrong, I will take my lumps (as always).

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