CLCD: Another Range Expansion-Contraction-Expansion Trade

September 20, 2016

As another example of how I'm using this SwingTradeBot to find and track good trades, here's one I closed out today: CLCD.

I posted CLCD to my chart notes  the night of September 8th after I noticed it on my Calm After Storm scan.  (See my blog post about the Calm After Storm scan for my reasoning for creating that scan.)  This is a textbook example of the kind of chart I wanted to find when I dreamed up that scan.  CLCD made a huge move on the 6th, pulled back on the 7th and on the 8th started showing signs of stabilizing/consolidating. That's what triggered the Calm After Storm.  

As I've written about several times, I like to look for stocks which are "In Play", trending strongly and taking break (pulling back or going sideways).  (See the Trading for Dummies lessons.)  The goal is to find a low risk spot to take a position for the next expansion phase.  I like to think of that expansion - contraction - expansion cycle that stocks often make as being similar to a slinky.

CLCD made 5 "Calm After Storms" in a row before resuming the move which it started on the 6th.  As you can see in the chart above, one could have gotten around a 40% gain (in 5 - 7 sessions) by taking one of those first three signals!  

How I Handled CLCD

I added CLCD to one of my watchlists after I discovered it on the 8th.  However, as I wrote in my note that night,  I noticed that they filed for a seconday offering that evening.  I expected that offering to put some downward pressure on the stock, so I decided to sit back and just watch it. Much to my surprise it gapped UP the next day.  So that's a clear sign of strength.  But I still wanted to see the market received the secondary offering.  That offering was completed on the 14th and the market soaked up the new supply of stock with no problem at all.  

I still hadn't entered an order for CLCD by the morning of the 15th but I did have it on my broker's watchlist.  I got an alert about it moving higher that morning and decided to buy it just as it approached the old high.  I exited this morning with a 16% gain (in 3 trading days) when I saw it approaching its upper Bollinger Band.  

If not for the secondary offering, I would have put in an order on the 13th, with a BUY STOP above the high on the 12th.  That ~38% gain would have been sweet but I'm happy with the 16% and having side-stepped the secondary offering.   I remain quite happy with my Calm After Storm scan!

P.S.  I may have to look into a scan to find well-received secondary offeriengs.  On August 18th I made a note about how well SHOP's secondary was received by the market.  It also shot higher after the secondary was done.