Volume Gap Trade In LEAP Wireless

I bought LEAP wireless on August 12, 2011 and sold on August 15, 2011.

Below are the factors that played into making this trade. This particular trade was based off of information gathered on StockTwits.

The trade idea was generated by StockTiger. His watch list highlighted LEAP as a potential breakout candidate on increasing volume.

A volume gap technique, an element from many prior analysis of Gtotoy of http://daytraderbootcamp.com/ was used as well.

Both of these users of StockTwits have great idea and trade generation.

I don’t trade breakouts often, the idea of the breakout into a no volume area is that there will be few sellers in this area wanting their money back to slow momentum to the upside.

Admittedly, I entered the trade too early. I believe the resistance was at 7.86, and when LEAP gapped open on the 12th through this level, filled the gap and ran higher I got caught in the 10:45 swoon. I jumped in right away expecting a quick move into open volume above.

This was not the case, and although my stop was not hit throughout the day it did leave an uncomfortable decision. I needed to make the choice of whether to hold over the weekend in a miserable tape, which I did.

The chart below shows how LEAP tested prior resistance and was flagging below a large volume gap.


The chart notes my entry as 7.72. It can be seen that the anticipated reaction area/trend line around 7.64 did not hold, and holding my position throughout the day was a painful one as LEAP sluggishly fell to a low of 7.42 into Fridays close.

I was not happy about this but considered my stop placed properly and my position size to be appropriate. Again, the flagging pattern was not overly concerning and volume on this pullback was less than average.

The chart below is updated to that Fridays close.


Monday, LEAP did exactly what I was hoping and started trading into the volume gap. It again flagged above prior resistance before making a move higher showing more strength.

I sold at the end of the day at 8.57 and captured an 11% run. My targets were much higher however. It was obvious that there was no volume till maybe 9.50 or even 10.00. Why did I sell?

Well, 11% is a great piece to take off the table, but I think that it is because after I entered this trade I was immediately questioning my timing.

Many talk about emotional capital. Even though my position size was appropriate, my stop loss hadn’t been hit, my basis was now well in the money and LEAP was reacting as anticipated… I had used up too much emotional capital holding LEAP into a sluggish close on Friday as well as over the weekend.

If my timing was better I would not have flinched. I was happy that things worked out but also happy to take my gains and run. I believe I didn’t let my winner run further because of this factor. Or maybe this is telling me something about my trading habits, that I prefer a shorter time frame than usual- certainly in this current market.

The chart below shows LEAP currently, as it continued to run into the volume gap gaining momentum on mixed days in the indices, hitting the targets anticipated.


No money was lost here but some left on the table- hopefully payment for some lessons to be learned.

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