What a mess August was for me. I ignored the underlying market breadth divergence and held onto market leader positions which, for the most part, were still performing well going into the month. Some of the losses I took in August were profitable trades that sold off after positive earnings, turning profits into losses. Some were leaders held too long into the late month market plunge. One was just plain a disastrous mistake. Searching for positives here reveals few this month. I had a few good trades, and I managed to end the month mostly in cash and a few favorable trades that are working.
August Net P/L: -24.9%
Year to Date P/L: -24.5%
- Inogen (INGN) +16.9%, 6-day trade. Top rated IBD stock in a secular uptrend. Position was taken ahead of positive earnings. Fearing a post-earnings sell off similar to others that hurt me, I took the profits and ran which proved wise as the stock later dropped below my position buy point. Looking for another entry here.
- Mattel (MAT) +8.2%, 24-day trade. Swing short position.
- Apple (AAPL) +7.7%, 21-day trade. Swing short position.
- Infosonics (IFON) -33%, 3-day trade. Stung by a lazy trade in a penny stock. Lazy because I failed to do the research where I would have learned that IFON’s earnings were due to be reported two days after I took the trade. That was just a dumb thing to do. Technically, the chart was a nice setup when I initiated it. Fundamentals decided otherwise. The only saving grace here was that my position was sized smaller for a wider stop, however the high percentage loss still did far more damage than was acceptable.
- ZIOPHARM Oncology (ZIOP) -20%, 11-day trade. Late to the party here, and late on the exit. Another smaller position, but the loss exceeded 1% of my capital nonetheless.
- Horizon Pharma (HZNP) -17.7%, 37-day trade. Winner turned into a loser, and I let it run too far.
- Tableau Software (DATA) -15.2%, 29-day trade. A winner with positive earnings that sold off. Did not anticipate that, then held too long.
- Facebook (FB) -12.6%, 24-day trade. Stopped out on August 24.
- Mobileye (MBLY) -12.4%, 28-day trade. Stopped out on August 24.
- Financial Engines (FNGN) -12.3%, 20-day trade. Stopped out on August 6 after disappointing earnings.
- Palo Alto Networks (PANW) -11.5%, 39-day trade. Another winner turned loser.
- Skyworks Solutions (SWKS) -11%, 29-day trade. Top and bottom line beats, increased guidance, yet sold off. This, above all other trades, demonstrated to me that when the macro environment changes and traders decide to lock in profits no amount of good news is going to plug the exits. A very valuable lesson learned here with Skyworks in particular.
I was very frustrated that my trading seemed to be going along nicely, then very suddenly the wheels came off and I ended up in a ditch. The fact that many of these failed trades were in leading stocks added to my conviction to hold them which lead to late exits and increased losses in some of them. I just didn’t want to believe I was going to chalk up losses in these types of stocks. While it cost me losses, finally cutting them prevented further losses later. I’m grateful for avoiding the trap of relegating myself to holding onto these losses in search of the magical break even point sometime in the future. I took a big hit, but it could be much worse.
Another factor in why my August losses were so large was due to the fact that I was trading on margin with large positions on most of the losing trades in quality stocks. Margin losses do indeed add up. I need to be aware of that in the future and more disciplined in taking exits when they flash. Revenge trading is not an option as I work to refine my process to move forward from here.
It’s very difficult to post this update, and embarassing. It seems like I should be having more success after four years of trading, but that’s not the case in the here and now. Then again, I’ve never experienced the type of market conditions we’ve had in August so, despite having experience under my belt, I had none which applied to truly understanding what I was dealing with in the volatile present we’re in. I’ve never known the degree of how quickly and viciously conditions can change and turn against you. The experience I do have kept me from being hurt worse than I was, and that’s perhaps the biggest positive I have going for me this month.
Long – CVX EOG JUNO NEM
Short – SPY