TLAB Trade Review

by Adam Beaty

Here is a quick review on the trade we placed today in TLAB.  First thing we notice is the magnitude of the drop in a two month span.  Tellabs has gone from 7.31 to 4.87 for a 30% loss.  With a stock that has lost so much so quickly it is bound to create a bottom somewhere and start a bounce.  We took notice of a nice round bottom forming over March with a firm resistance at 5.23. 

Watching it this morning we noticed it was going to open right on resistance.  A personal preference is to have stocks open lower than resistance and just blow through them.  However, we didn't want this stock to get away from us so we put on the trade with 3/4 of our normal position with a stop-loss on yesterday's low.  TLAB caught some volume in the morning and started to move higher.  We went ahead and moved our stop-loss to today's low putting our risk only at 4cents.

Instead of quickly scalping a gain from this trade we went ahead and decided to hold it overnight for a couple of reasons.  We noticed a lot of breakouts happening today that were able to keep their strength all day, volume has picked up on the breakout (even though more would be ideal), and this is a solid bottoming pattern.

Initial price target will be the 50 day moving average, but will judge on a day by day basis.

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