DNDN: Ye Olde Knuckle-Biter

For lack of a better term, when a stock breaks out (or breaks down), then closes back inside the pattern, I call that "Ye Olde Knuckle-biter," because we're left wondering how sincere the stock was about the breakout (or breakdown), and whatever target that is IN PLAY goes ON HOLD until we see what develops.

After the big black candle of June 30, the low of which was 39.22, there was news having something to do with the government paying for DNDN's Provenge drug, a treatment for prostate cancer, which is very pricey. Something like $93,000 for four treatments, but definitely check me on the facts, if you're interested in the fundamentals. I'm only interested in the market's REACTION to the fundamentals, so I could be wrong about that.

NOTE TO YOU GENTS: My understanding is that prostate cancer is one of the most treatable cancers, if detected early. It's a very good idea to have both the physical and PSA test annually. If you're put off by the physical test, think about what women have to go through during their lifetimes with all of the poking around, etc. It's not a big deal, so DO IT. (My brother-in-law has Stage 4 prostate cancer. He never went for the tests. God bless him).

Back to bidness...

The market's REACTION to the news was to break the stock out of a Symmetrical Triangle, two sessions later. The breakout held in the next session, but in the following session, DNDN finished back inside the Symmetrical Triangle for a "Ye Olde Knuckle-biter" close.

Technical analysis doesn't TELL US what to do. It only gives us information, and in this case, the information is, "There is evidence that the upside breakout of this Symmetrical Triangle "could be" a Fakeout/Breakout. The upside targets are ON HOLD as long as the stock remains below the breakout. What would we like to do about that?"

That's a money management decision, and it's up to the individual to make that determination, but it's important to have a stop loss in mind, in case the stock goes south so that we don't become bagholders (I think that I dislike that term so much because I've been a bagholder too many times...LOL).

Some players will give it another day, then sell if it closes back below the breakout a second time. Others will use the 39.22 low of the June 30 candle as their stop loss. Others simply will throw it in on the first close back inside the pattern, for a small loss. If the stock breaks out again, it always can be bought back and turned into a gain, given that the upside targets that would be back IN PLAY.

Taking a loss never is fun, but consider it a part of doing business. There's no getting around it. We WILL have losses, but if we employ sound money management skills, our gains will exceed our losses. Be objective and view it as "the trade went wrong," not as "We are wrong." It's best to get the emotions out of there.



Yesterday's close of 39.20, two pennies below the June 30 low of 39.22, was downright evil because it makes it very difficult to defend being long an upside technical breakout when the stock has closed below the "good news" low.

The trade also is more than a "Ye Olde Knuckle-biter," with the stock closing well inside the Symmetrical Triangle pattern. Traders who threw it in on the first or second close back inside the pattern are glad that they did, I would suspect. Buying the breakout at 41.56, or higher, now is a paper loss of 5.7%, or more, at yesterday's 39.20 close, so it's become a difficult trade.

Just something to think about. Analyzing charts is one thing. Actually play them is something else altogether and not always easy, as evidenced by this example of DNDN.



A few comments are on this Ichimoku Kinko Hyo chart for Mary to peruse while she sips her morning coffee ;)