Dec 17-21/Q4 Trade Review
I'm back in front of the screens today after my holiday break was extended by a nasty head cold. As expected, earnings were light going into the end of the year, so my trading followed suit. While I logged a total of 338 trades in Q4, December as a whole accounted for only 14 of them. My fully automated trading officially went live in the last week of September, and I've been net positive every month so far. Total p/l peaked at 35% in the height of Q4 earnings season, then normalized into year's end, finishing at just under 25%. This kind of volatility is expected for smaller accounts (I started in Sept with 30k) and I also experimented with $10k position sizes before settling on $5k per position. My focus going into next year is fewer trades, smaller position sizing, and lower p/l swings.
A few trades worth noting from Dec 17-21 are all low-priced shorts triggered by new lows or technical breakdowns with recent earnings announcements. Keep in mind that I don't research and build watchlists ahead of time, these trades were located and entered automatically based on filter criteria I defined months ago. I wasn't even sitting in front of my computer when these trades were opened. I don't post these charts and entries for me, I keep a detailed trade log to continuously improve my performance. These are for you, so you can realize and learn the power of software-assisted and algorithmic trading. Now let's get into some charts!
$ENZ reported earnings after the close on December 10th, which we can see on the far left-hand side of the chart. The stock booked a 10% loss on Earnings day (the 11th), then consolidated for a few days before starting another leg down. Playing off support in the $2.90s, my auto-trading system got a fill at $2.85, with plenty of room to profit as the stock experienced a continuation breakdown trend into the holiday.
That massive +20% gap down on the left-hand side of this $SEAC chart was a good indication of more selling to come. Think @TraderStewie's PEG (Power Earnings Gap) chart pattern, but in reverse. Much like $ENZ, this stock consolidated for a bit before attempting a secondary breakdown. I got an entry at $1.33 when the chart was breaking down through support in the $1.30s, and the stock continued to sell off another 10% over the next week.
$CDMO was another after-hours earnings announcement on the 10th that was met with strong volatility. Earnings day (the 11th) opened with a sharp morning sell-off, then recovered and consolidated for about a week before breaking down. This is when I got an entry at the $5.15 post-earnings support level. The trade didn't work immediately though, we got a bit more consolidation before continuing 20% lower over the next few days.