Here are my trading thoughts for MCHP on the Open.

1) Short below 33.50. Steve, @sspencer_smb, mentioned 33.50 as a level during our AM meeting. MCHP was gapping down below long term support of 34 and impressively overall. Below 33.50 and I started a short position. This was not the easiest play as there was some volatility above and below 33.50. But 33.81 was a line in the sand to before 34 again.

2) Lighten up. Steve started chirping that 32 was not a good risk/reward in MCHP. Our ears are an indicator that we must learn to use. I intake this data and then make my own trading decisions. When a seller lifted, changing a recent pattern on the tape at 32.38, I covered most of my position. The inflection in Steve’s voice signaled me to be careful here. I remained short 1/3 of a position.

3) Short. With a short position of 1/3 I was rooting for MCHP to find 33 again. My intution was that we needed a quick spike and battle for there to be one more good trade to the downside in MCHP. I scaled into a short and replaced my price on the way up. So I shorted some 74c and then 89c covering some 81c and then getting very aggressive at 99c and 98c and quickly covering some 91c while increasing my core position to three lots.

There was some work to be done when MCHP leaked above 33 but I will still managing my short. I did cut my position in half but reentered on a pattern change from the tape. MCHP could not hold the offer at 33 nor move away from this price. And then it did. I reestablished my 3 lots short.

4) Lighten up into the move towards the low of the day, near 40c. I took some off around 75c and into the 50c. I was short 1/3 a position and needed to see a hold below 40c to get bigger again. You could trade this different and cover less from the 33 level. More than one way to look at this trade.

5) Cover. (note there are some late prints on the chart above. MCHP did not breach 33. HT @sspencer_smb).

I have been getting a lot of questions about dealing with (5). Trading is a game of probabilities. Sometimes MCHP is gonna finish near the 32 and below. Sometimes you are gonna get stopped out above the 33. We were in a good trade with an excellent risk/reward position. I cannot control what happens after that. Nothing to get upset about if we get stopped above 33. Just as there ought not to be whooping and high fives if the stock trends lower for the whole day.

Bella

Author, One Good Trade