Monday, May 02, 2005

I've been talking bullish on GRU for months...

I figure there's a reasonable chance that the market gets run up ahead of the fed meeting tomorrow because it seems to happen every other time. This is my GRU launchpad, the wind at my back for this patient, calculated trade. The window of opportunity is small only to the unprepared!

I've been talking bullish on GRU for months but I never took a position in it. Today I decided to hedge my shorts a little heavier and got a GRU fill at $16.74. Stoploss @ $16.24. The idea behind a $16.24 stop is that if it falls through that price, odds are it is making a run at the lowest low in the range, near $15.50 so I can try to get shares at the cheaper price if the old low holds. Worst case is I get shaken out for a small loss (or I could get gapped).

If the GRU trade works out for me and GRU advances, I expect one of two things to happen. If the volume is light, GRU will probably stall out near $22 at the top of the range. However, if the volume is heavy enough, it may not even stop going. So when I sell this thing really depends on whether or not I feel the volume is enough to propel the stock out of its range.

This is one of my favorite kinds of long plays. My risk/reward ratio is way stacked in my favor: 3% downside ($16.24), 30% upside ($22). This is what I like to call a "layup trade". They're really the only kind worth taking.


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