Taking First Profits On VMWARE (VMW) Short

07/06/2011 Uncategorized  No comments

vmw

Last week I highlighted the extremely bearish day and candle from June 1st in VMW.  Read last week's entire analysis here: http://thesteadytrader.com/short-side-opportunity-in-vmware-vmw/

The long tail and intraday failure at a new 52 week high gave us a setup for a high probability short-side opportunity.  Fast forward to today, and VMW has followed-through to the downside where we are taking first profits and leaving the rest of the position on for a test of the 50 day moving average (yellow line).  

The analysis deployed on this trade was candlestick analysis.  The beauty of trading with candlesticks is that investor emotions (fear and greed) are visually depicted in the shapes of the candles.  Not only does this give us clear buy or sell signals but also makes it clear where to place stop-loss orders.  

VMW can of course fall much lower than the 50 dma, but from a risk management point of view it is significantly more prudent to take profits along the way and not get too greedy.  Base hits are what wins this game.  The occasional home-run is bonus material and should not to be counted on.  
 

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