Over the past month, our stock in focus today has risen and fallen, creating a well-defined channel with a floor and ceiling traders can use as a guardrail for the time being. Up 3% during the last 30 days, price has recently rejected of the top range of the channel, and if the sell off of the broader market continues, the drop should continue as well.
In the video below, you will see the floor and ceiling between 44 and 49, so a pretty wide range. One thing this brings to mind is a piece of risk management I often like to teach my students and it’s the idea that once you find your levels or zones for mapping out the stock’s price movement, you must develop the discipline to not trade when price is in between zones. Meaning, just because you think you have a sense of where the price is going, in this case with CubeSmart (CUBE), doesn’t mean you jump in with both feet before the price gets to your level or zone.
In this case, it would mean not taking a trade UNTIL price is at a price level you have confidence in. This would look like waiting until you reach 44 or 49 to start planning your trade. Once price gets there it STILL doesn’t mean you take a trade, you’re not a robot, you need to gauge what price action is telling you at these levels. If price actions seems weak at the bounce level of 44, you wouldn’t simply take puts because you’re at a bounce level, you must be patient.