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Stocks mixed after lower open

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Stocks have managed to recover from earlier lows experienced after the opening of trading. It does appear perhaps that comments from the Labor Department concerning the impact of job losses due to legislative decisions may indeed have had some market participants discounting this morning's weaker than expected jobless data.

Closing your trades at targets

In this morning's 09:00 Update we felt bearish traders in Check Point Software (NASDAQ:CHKP) should aggressively lower their stops to protect their fortunate gains and be ready to pay themselves for their hard work with a stop at $21.50. That stop should have been triggered.

Too often I'm seeing traders (bullish and bearish) see some targets achieved, only to let those profits evaporate in a very choppy market and then get disgusted with the thought that they can't make money in stocks or options.

Check Point Software Chart - Daily Interval

Since CHKP was indicating a lower open below previous retracement, I had to quickly roll down my retracement to find a level of potential resistance. As outlined above, the retracement could be rolled down with the 80.9% at $21.01 being a level of potential support/resistance. We also note that the stock traded right down to the lower end of regression and may also find support at that trend. A trader that did short the stock at/near $31 when we profiled this play in the market monitor was perhaps risking a stop to retracement of $35. With the stock trading $21.96, a trader that continues to hold out for lower price is now risking roughly $9 (from profiled short) to make an additional $7 to lower retracement of $14. From a risk/reward profile that would be TERRIBLE trade management. The bulk of a gain has been done in a relatively short amount of time and proper trade management would be to try and remove risk from the trade. We would not look for a potential rally to $27.47 to be another potential shorting opportunity. However, a trader is looking to book gains and move on to other opportunities.

Jeff Bailey
Senior Market Technician
Option Investor

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