Hey guys,

My week has had a lot of ups and downs! If you look at my most recent trades you'll see I've been getting fairly consistent, but unfortunately I likely have just lost a large part of it.

The situation:

I was out of day trades, so at the start of power hour I put in a stop-limit on DGLY.

It was looking pretty strong, plus I felt that if it broke past this resistance point there was quite a bit of gap room...So I set my stop price as 7.20 and my limit at 7.23.

However, you can look at the chart and see what happened next...I'm holding over the weekend, and if it dips to 6.50-6.60ish I'm gonna cut my losses and leave, and if it holds its current level of support or looks positive I'm gonna hold and see if it has any more spikeability.

 

LESSONS I LEARNED:

1. Buying the breakout is the right idea, but setting your limit only ONE CENT above the key resistance level only works reliably for subdollar stocks, because for those one cent is such a huge price different. However, for a stock at around $7 like DGLY, one cent is nothing so I should be setting my stop prices AT LEAST 10-20 cents above the resistance to make sure the breakout's confirmed before buying in.

2. It's great if a stock breaks the last major resistance level, but don't underestimate how many people doubt that will happen and are likely to sell, especially on a stock that's been in the headlines all day, and especially one that's had SHARP jump up to the resistance increasing the chance of  sharp pullback.

3. If you have no day trades, you need to be more cautious EVEN IF it's the last hour of the day. You need to trade even more scared. If you have no day trades only buy stocks with larger risks once the breakout is confirmed or it's the last half-hour.

4. Kind of an add on to lesson 3 - What I mean by larger risk is, Just because something has a good risk-reward ratio, doesn't mean there is NO risk...you need to make sure you're comfortable with the the actual monetary amount of risk as well. For example: If a stock has 20 cents of risk and a dollar of upside, that's a 5:1 risk-reward ratio, but if the stock is at, say, 2 dollars right now that 20 cents is actually quite a bit of risk. Still perfectly playable, but you have to be cautious especially with no day trades. That was another mistake I made on DGLY, even though I saw a good risk-reward setup the risk still entailed an easily possible 50-cent drop.

What I hope to learn in the near future:

To me, DGLY could go either way. I want to see which way it will go and, more importantly, figure out why. Some people say it will crash and burn immediately, and I agree that it likely will by the end of the week, but on Monday I think it could definitely gap up at least for a morning spike due to exciting people buying in over the Dallas shooting news & this thing's massive gain. It's also broken almost every local resistance level and is on the verge of a multiyear breakout, so I can definitely see a morning spike on Monday if it can break those nearby resistance levels.

I'd also like to know your thoughts on this. What do you think about DGLY for Monday and why? All thoughts and comments are appreciated and desired. Also, if you think there's anything in this post I could make clearer or elaborate on, or anything I could improve on at all please let me know!

 

Alright, see you all again soon!

-Ben C.