Equity futures are lower this morning and have been weakening most of the morning. S&P futures are lower by 5 points, NASDAQ futures are off 36 and Dow futures are down 5 points. Equity traders might want to take a wait and see approach near the open. Treasury yields for both 10 and 30-year are higher, but the shorter-term 5-year yield is lower. This action should provide some stability to stocks and equity bulls will want to see bond yields creep higher. In the past couple of weeks, a rising bond yield has been good for technology stocks, but the deep cyclicals have suffered to the downside.
What to do when a trade gets away to the downside.
I received several e-mails from subscribers on Friday. Some were overjoyed with the results from VeriSign (NASDAQ:VRSN) but there was one trader that "forgot" to put in a stop on our "second helping" at $84. This happens from time to time and here's something I found useful in the past (it's happened to me too). The first thing to do is remain calm! Where is support and where is resistance. In VRSN's case, I'd say support might be found at my "confirmation level" near $76.50 (Tuesday's low) and resistance at $84 (the 200-period and 50-period MA's from the 60- minute chart). This $84 level is where we had identified a stop for a bullish trade at $86.
VeriSign Chart - last five months.
Shares of VRSN are indicating higher this morning at $80.75 and I'd definitely put in a stop this morning just below the $76.50 level. A trader that didn't put in a stop at $84, should now plan on selling that level if a rally takes us there. The best way to think of this is to realize where you are now and where you want to be in the future. If I were long at $86 and "still holding on" I probably wish that I had put my stop in at $84. Traders that are still holding on and wish they weren't should snug up a stop just under Friday's low of $78.88. Let the stock sell itself and then learn from this experience. Friday morning we were selling the open and taking nice profits. We don't want this stock to turn into a "big loss". Big losses are harder to recover from. I don't like losses, but I despise big losses.