Well, back on October 27th, I thought it would be genius to add a short position in Best Buy (BBY).
And at the time it looked like a good idea as a hedge against my multiple long positions in the portfolio. SPX was in the middle of a two day pullback and things were looking like there could be a few more days of selling. It had already rallied over 200 points in the past four weeks. Some protection was needed.
And the BBY chart was absolutely amazing… this is how I described it to fellow members of the SharePlanner Splash Zone:
Yeah, it was looking really good. This thing had bucked the entire October rally, it was consolidating some and working off the oversold conditions and coming out perfectly of a bear flag.
But then Friday happened, and it never looked back. Up until this point, the stock was doing fine for me, but when the market was down 10 points, this piece of garbage decided to rally nearly two percent on me. Then yesterday wasn’t any better, and this morning, before I let it hit my stop-loss of $35.80, I went ahead and closed out my position at $35.52 and saved a few extra bucks.
Perhaps I jinxed the trade (not that I believe in jinxing anything when it comes to trading) when I decided to order a Microsoft Surface Book from them and they weren’t even able to get the order right. I was punished further as I stood there in Customer service for two hours that evening waiting for the order to go through, and then it still didn’t and forget ordering online – that wasn’t working either…whatever.
But in all seriousness, the question after a trade like this is obviously, “Was it a bad trade”. From a setup point, I don’t think it was. It was sporting a classic breakdown pattern, it had bucked the market and all signs were pointing down.
The next question was, should I have been shorting a stock at this point. In hindsight the answer is obviously “No.” But when you are in the heat of the moment, the market was showing some signs of weakening, and considering the run up, putting a 100% faith in this market, would never be a wise decision. I could have chosen to curb my long exposure instead, but I liked my portfolio’s make up and I really saw the BBY trade setup as a gem.
So the trade didn’t work out. That’s ok. Bad trades aren’t defined by whether they are profitable or not. It is about how you manage them, and your reason for getting int them. In the long run I’ve always managed to be profitable in my trading. You can check out all my trades in the Splash Zone by clicking here. Hindsight always makes the trade inadvisable, but you have to work with what is right in front of you because in the heat of the moment, hindsight isn’t a luxury that is provided to traders.
