I'm sitting here thinking about today's action. How I could it play it better next time, you know?
I could have sold near the open, cashed out and then bought again later at around 63 once I saw it bounce of it's low of 62.78. I could have made tons of cash doing so.
But how to know it would fall that day that low? I know, that's the billion dollar question everyone would like to know. I know we are going to new highs. But I could have played this stock much better today.
Short-term tops have basically occurred at $5 increments (50 in Mar, 55 in Apr, and 60 in May) which leads me to conclude that it is a decent probability we are near another short-term top again with the stock moving to $64 and that maybe we top out around $65-66 before it goes sideways or pulls back again to that 50 DMA.
We shall see, but yesterday's price action of gapping up and closing down big is a pretty good sign of a short-term top. How to play it next time? I think selling calls against a stock position or even longer-dated options is the smart play when you get these overbought/overextended conditions, and I sold a bunch of July 75 calls on the gap up before it reversed and the day before, and I mentioned this in a previous post.
As I said, I thought and still think comments to the effect that this stock was going to run to 75-80 in the next month on Haynesville or some big material information coming in the next few weeks was hype and not substance.
I think we are going to test 59-60 in the next 1-2 weeks which is Aubrey's last purchase level or maybe even pull all the way back to the 50 DMA again. Haven't decided yet, but I might buy some July puts today to hedge against a decline (I've got 45 LEAP contracts) with the idea of selling them around 59-60.
IMO, the biggest enemy a trader faces are his own emotions of fear and greed. Next time CHK makes a big run in a very short time frame, fight the greed telling you it is racing to the moon overnight.
It's always easy to see that in hindsight. I made money on both short and long side today. Caught the short side very near the top, but got out long before the bottom. Just no way to know how low it will go.
It moved so low, I bought July calls again for a trade around $63, but got out with CHK just above $65. I consider myself lucky, and I didn't squeeze near the cash out of everything I could have catching perfect top and bottom. It just won't ever happen on a given day without dumb luck, IMO.
The only smart thing I did was buy October $55 calls with CHK around $64 (well before the bottom) that will be held to - or very close to - expiration. I will be in the money with CHK above $67. I will consider more aggressive options if CHK goes to $60-$62 range, but I'm not holding my breath.
Don't spend to much time thinking about "what could of been." It's always easy to trade history's numbers, but nearly impossible to trade any given day's action perfectly.