$MDCO, The Medicines Company

Trade Date: 02/03/2017 – 02/06/2017

            Sometimes a phenomenon called the “Sister Stock Correlation” happens when good news from one company will significant affect the performance of another in the same industry. This is precisely what happened to $MDCO when rival pharmaceutical Amgen Inc. announced positive clinical trial results. So why did I trade $MDCO? Because the premarket momentum was stronger. Momentum is momentum and well $MDCO ended up with a higher percentage gain than Amgen did anyway. I don’t know why, don’t look at me.

            Despite taking this as a Short Term Swing Trade, this was also a great opportunity for a day trade. But sometimes my capital is already committed, preventing me from taking certain trades.


Technical Criteria

  • Price Change: $ +3.26 and +21.00%
  • Premarket Volume: 619,500 shares
  • Daily Average Volume: 1.10 million shares
  • Average True Range: $1.33

Trade Style: Short Term Swing Trade

Position Bias: Bullish


Entry Price & Time

            Usually I like to see strength right at the open, but sometimes a stock needs a minute or two to get its engine running. The Bull Flag setup finally appeared and the price broke the highs, but I missed the entry a bit chased it. Not too bad, but will be more careful. 

            Entry Date: 02/03/2017

            Entry Price: $42.86

            Entry Time: 9:37 AM

            Stop Price: $40.80

            Risk: $2.06

$MDCO Entry on the 1 min. chart

Trade Management and Psychology

02/03/17

            I was nervous about this trade for some reason but sometimes your fears are irrational. Just because something might happen doesn’t mean that it will happen. After I entered the trade it never stopped going up.

            9:50AM: The stock pulled back past my entry price and turned into a loss. I know some of you might be screaming, “Why didn’t you take some off?” Well, it’s not a part of my rules to scale out because it’s doesn’t fit with my personality. Scaling out at there would have made me uncomfortable because I need my winners to be larger than my inevitably small losses. Once you see some big gains by sticking to your rules, it gets harder to break them.

02/06/17

            3:30PM: And if I did scale out, then I wouldn’t have seen this move on the second day! Ka-boom.

Exit Price & Time

            Exit Date: 02/06/2017

            Exit Price: $47.41

            Exit Time: 3:31 PM

$MDCO STWT Exit on 1 min. chart

$MDCO Short Term Swing Trade Execution

Results and Evaluation

            My first big win for the Short Term Swing Trading account this year! Well, ok nothing crazy, but wins that are larger than 1R means you’re on the right track. As long as I have trades like this while keeping my losses no bigger than 1R, the account should be positive by the end of the year.

Risk: $2.06

Reward: $4.55           

R Multiple: +2.18 R