Critical Feedback: ACN

sspencerSteven Spencer (Steve's) Blogs, Trader Development4 Comments

I would like to spend some time reviewing how ACN traded on Friday October 1st.  The big picture in this stock was they had reported their earnings and raised guidance going forward.  The initial reaction to the news was that it popped in the after hours on Thursday.  The next morning it was trading above the previous day’s after hour range (see chart below).  On our morning game-plan sheet our initial bias was to trade it from the long side if it were above 44 (see chart below).
20 SMB traders made at least one trade in ACN Friday.  Five traders lost money.  I asked each of the traders who lost money trading ACN to send me their executions and explain to me their thought process as it related to each trade they made.  I felt that this process would allow me to engage in critical feedback, which is one of the elements necessary to develop elite performers (ideally the feedback would have occurred in person  immediately following the traders performance).

The first thing that stood out to me in the five traders that lost money was that each had four months of live trading experience or less.  In other words the least experienced traders on the desk had the worst results.  This begs the question as to whether a lack of experience may have played a role in their under performance.

Let’s take a look at some of their trades.  My comments in blue.

  1. Hi Steve,Here is the trade in ACN, 44.5 was a pre-market high and when it retested it the first time after the open it rejected the price.  The trade was to pay the offers if 50 cents lifts as a momentum trade. I payed and was filled at 53 cents.  As the stock dropped through 49 cents I hit the bids an was out at 46 cents. There is some good info here.  The trader is making a technical trade based on a pre-market level and is treating it as a momentum trade, which means they will exit if it trades against them or when the momentum slows.  The execution of the trade was spot on based on their analysis.  The only bone I have to pick is that “44.50” was not the pre-market high. It was 44.45 and most of the volume was actually between 44 and 44.40.  A BETTER momentum trade would have been paying above 44.45 or even 44.40. Would there results have been better with similar execution but instead using the ACTUAL level from the premarket?
  2. Morning Steve, I was in ACN this morning.  This was my primary stock pick.  I was long 44.54 when the stock lifted the offer.  I hit out of it when the offer dropped to 49 cents.  When the stock approached all time highs of 44.67, my out was if the offer came back to 44.66.  When the stock got close to 45, I saw 200k shares being offered.  When they lifted the stock I bid 45.05 and it printed 45.10 almost instantly.  I decided not to chase it and got in on the pullback to the level, considering the volume that was done at that price.  When the offer dropped 45, I hit out of the stock.  After spending some time below 45, I saw that the stock began to head above the level and the bids showed up for 50k shares.  I got in with my one of the stops below 45 and the second one at 44.87 which was 1 c below the low of the retracement from the highs of the day. First thing I notice is that this trader chose ACN as their primary stock, which means they will trade it actively attempting to limit their risk and eventually capturing a bigger move. I cannot tell based on their email why they assigned significance to the 44.54 level.  Bidding above 45 made sense as a large seller was taken at that level and most breakouts tend to retrace close to their breakout price.  I do have a problem with the fact that this trader did not get long above 44.25 when the large seller lifted.  As his primary trading stock he should have been all over that trade.
  3. Good Morning Steve.I was watching ACN this morning from the open as the 44 Level was Significant & a 43.50 Entry would’ve been Ideal.  I ended up missing the Up-Move away from 44.  So I was looking to Re-establish an entry.  I saw that it consolidated for a few minutes near the 45 Level before breaking above.  Once it broke above & with the Strength it did it with, I was waiting for a Pull-Back to possibly catch another up-move away from the 45.  I put in 2 bids… One at 45.10 & the other @ 45 even.  My average price for both lots was 45.05.  Unfortunately I was unaware there were some Economic #’s that had come out.  The Market moved Negatively rather quickly & so did ACN.  I swept out a soon as I could, which landed me 10 Cents out of the money. =(   The first thing this trader says is that 44 was a significant level.  I would agree.  Then why were you not bidding in front of this level on the Open to get long? The low on the Open was 44.  ACN was only at 44 for about 10 seconds but if this was your primary stock and you had identified THIS LEVEL as important beforehand then you should be bidding for stock there.  The trader then moves forward in time to ACN trading at 45.  What happened to all the price action in between?
  4. Steve,I shorted ACN in front of the held offer at 44.25 with my stop above at 44.26. I’ve attached the chart. This trade was ok other than it was not a “held offer”.  SMB would define the selling at 44.25 as an “unusual” held offer and thus would warrant a counter trend position.  This is strictly a tape reading play.  The tape momentarily trumped technicals and intraday fundamentals until this seller eventually lifted leading to a quick 25 cent up move.  If you are going to make this trade the proper way to execute is to have a bid limit order ready to enter the moment the 44.25 lifts.  Your bid should be to cover and get long and be entered at 44.30 to make sure you will get stock.
  5. 09:34:11  ACN 100 44.23 SSD ARCA 0/100
  6. 09:35:50  ACN 100 44.32 BOT ARCA 0/100 -9.00
  7. Unusual held offer. Got short.  Guy lifted I wasn’t fast enough to flip my positon.
  8. 09:38:17  ACN 100 44.50 BOT ARCA 0/100
  9. 09:39:54  ACN 100 44.48 SLD INCA 0/100 -2.00
  10. Bought on held bid.  Bid dropped so I hit out. My stop should have been below .25 since that is where it exploded from.  Wrong stop.
  11. 09:42:02  ACN 100 44.45 SSD ARCA 0/100
  12. 09:43:08  ACN 100 44.60 BOT DIR+ 100/0 -15.00
  13. Looked weak after guy dropped and 50 couldn’t hold the bid.  It was more consolidation which I didn’t recognize so it sprayed up and I got stopped out. Bad trade stock was strong.
  14. 09:56:50  ACN 200 45.05 BOT ARCA 200/0
  15. 10:01:20  ACN 100 44.93 SLD ARCA 100/0 -12.00
  16. 10:01:21  ACN 100 44.91 SLD ARCA 0/100 -14.00
  17. Bought when the offer at 45 decremented got filled at .03 like the move held both lots to let the stock find higher ground since it was above all time highs.  Number came out market got weak and I got stopped out of both my lots.
  18. 10:15:36  ACN 100 44.83 SSD ARCA 0/100
  19. 10:16:28  ACN 100 44.94 BOT ARCA 0/100 -11.00
  20. Saw that it was having trouble getting above 45.  Got short when bids started getting hit it bounced off of .80 into the 90s where I should of added another lot. And used 45.12 as my overall stop.  With my target being 44.25 with one lot and 44 with my other lot.  My mistake with the improper stop.

This young trader provides me a play-by-play breakdown of each trade he made.  He stuck with the stock despite the fact that he lost on his first few trades.  This makes sense to me as the stock was very In Play and it just takes one winner to wipe out 3 or 4 losing trades.
In terms of his thought process I don’t really like the shorts after the seller lifts at 44.25.  The stock has gapped up on news and taken out all resistance levels.  You need to find a way to get long.  He recognizes this to a certain extent in his trade review where he chastised himself for shorting it. But then he tries shorting again when it fails to hold above 45.  I think his analysis to a certain extent relies on the price action later in the morning that brought the stock all the way down to the 44.25 breakout price.  The big picture in this stock was that it was at all time highs and very easily could have consolidated above 44.80 before starting another up leg.


4 Comments on “Critical Feedback: ACN”

  1. I’ve been following the blog since late July and would rank this as the coolest entry I’ve seen yet. In fact, I think it calls for an encore…..notes (with Steve’s feedback) from the 5 traders who made the most from ACN on Oct 1 🙂

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