$HPQ- Do You Know What an “A” Trade Looks Like??

Our main job as traders is to take advantage of the opportunities the market provides us everyday.  We take these opportunities and turn them into trades where we must manage the risk/reward associated with each idea.  It is up to us as traders to risk more on our really good ideas and lower our risk exposure when the probabilities are not in our favor.  Today Hewlett-Packard(HPQ) provided a great example of a trade where it was our responsibility to trade it with some size and take on more risk because it was an “A” setup. 

For the past few weeks HPQ has been in the news and has been trading with increased volume.  After the gap down earlier in the month HPQ has been showing relative weakness compared to the rest of the market.  Going into the open today we knew that 40 was an important intraday level to watch.  We opened at this level and it immediately held and we started to trade lower.  I didn’t get in on the open so I was looking for an offer to hold and sellers to step in.  This happened at 39.85 as the offer was getting hit and HPQ wouldn’t trade higher.  A print went off for 400000 shares and the bids dropped fast to 39.80.  The bid started to get hit so I got in, knowing that I would add size to this trade if the offers held below the low of the day.  I added to the trade below 39.70 and was able to get a point from my core position scaling out some of the trade at 39.25. 

The main thing I need to take from this trade was how I felt and the conviction I had in the idea as it was playing out.  I knew what I needed to see, to know the idea was playing out.  I was able to hold most of my core position for the entire move because the trade was acting like a weak stock should.  As traders we should be looking for more of these “A” setups as they allow us to trade with size and a stronger conviction.  These are the types of trades which can make your day, which in this market can make your week.  Best of luck tomorrow and have a great night. 

Kyle