I hopped into WLT after breakout retracement at 6.47. I know WLT is a volatile stock with many head fakes and traps but I also didn’t want to miss an explosive move, so I got in right at the support line. While picking a stop, my intuition told me that price might come down to around the 63% fib line of the last move, also testing certain moving averages, I set it to 5.90. This morning, price came down to test 5.92 in early trading and is now still oscilating between 5.95-6.02. Of course I hope that it reverses before my stop is hit but I will definitely cut my losses in case it does get to my stop point.
What can I learn from this experience? Well, I am increasingly becoming keen to my own intuitions about the market, especially in the coal space since I have watched daily fluctations so much. In this case, I think I could have reserved my buy at 6.47 and instead extrapolated my thinking to my stop, 5.90. If I were to set my stop there, thinking price could visit near that area, I should be patient and wait for price to get to that area first. Indeed it did, and it perhaps could move lower, but in being patient, I could have limited potential losses and increased potential gains in the process.
There are many stocks to trade, and there is no benefit to rushing into something when you feel it has a good chance of coming down to knock out weak hands.