Short Swing Trading
Case Study – ANF
Lets walk through a recent SHORT SWING TRADE in ANF.
With the RETAIL sector basically trading sideways while the overall market continued its upwards crawl we started to take notice in how ANF was trading.
For the almost the entire month of December and into the beginning of January ANF traded in a tight range below its below its 50 period SMA.
ANF finally broke DOWN out of the range on January 7th, 2010 on HUGE volume.
With the market making new highs during this time we were NOT comfortable fighting the trend by entering a SHORT position at this time.
While the market edged higher for the next week ANF made a small LOW volume retrace.
Noticing how the RETAIL sector was not participating in the markets UP move we zeroed in on ANF.
On January 15th ANF triggered a SHORT SWING TRADE entry signal for us at $32.50.
Our initial STOP was placed at $33.20, .02 above the highest high during the retrace, for a risk of .70 per share.
This was a little tighter than a 1 ATR stop however this decision was made on the recent chart pattern combined with current market action.
Our initial PROFIT TARGET was set at $30.40, just above potential support at $30 on the longer term chart, for a risk/reward ratio of 3:1.
The next trading day ANF confirmed is relative weakness by basically "stalling" (trading slightly lower on low volume) while the overall market had a nice strong UP day.
Wednesday and Thursday the selling continued and ANF headed lower almost reaching our profit target.
The market was also selling off on good volume so we felt comfortable with our SHORT trade but lowered our stop to protect our profits.
Friday ANF traded DOWN through our profit target but with the overall weakness in the market we decided to tighten up our stop (instead of exiting) and see if ANF would continue lower.
By the end of the day ANF traded down to $30 for the second time that day and we were able to exit near the close at $29.99 for a profit of $2.51/share (3.5 R/R ratio).
