GPN Going My Way!

GPN ended the day yesterday down less than 6% so it was a go for this morning's cash in the box trade. The stock opened at $44.47 where it was sold short. At the moment the stock is trading at $43.87 already down 60 cents or over 1%. Our goal on the stock is to buy it back at $42.25 for a $2.22 gain the usual 5% gain..The April $45 Put was purchased for $1.10 ask price and is now $1.45 on the bid price.for a 32% gain so far. Nice.We will set our contingent order to sell the put when the stock hits $42.25. As always our stop loss is set for 6% above today's purchase price at $47.14 (which is just above the support now resistance line). That's why we never play stocks that have moved more than 6% out of the cash in the box. Our initial risk is 6% and our gains are set for 5%. If 80% of our trades succeed and 20% fail that should give us overall gains of about 28% on our money.That is system trading with a mathematical probability of success. It eliminates the emotion and the guessing that causes most people to lose money. Follow the system rules. Below is a review of the Breakout system developed by The Chartman, Gary B. Smith who has since gone on to manage a hedge fund..

• Trade stocks of $20 or greater value
• Trade stocks that trade 500,000 shares or more on average per day
• Trade stocks that have been trading in a flat range for 20 days or more
• A Range is determined by the ability to draw a horizontal  line touching the topmost points of two or more of the highest bars and a horizontal line intersecting the bottom tips of two or more of the lowest bars (this establishes the "rectangle formation" or "box" see chart above for an example).
• A stock must have broken above or below the box on a volume spike that exceeds the volume's 50 day moving average line (see the volume indicator on the above chart, how the volume spiked yesterday significantly higher than the little white wavy 50 day moving average line)
• Trade only stocks that have moved 6% or less above or below the box. 
• Buy the next morning at the open.
• Sell the stock as soon as it gains 5%
• Set your protective stop loss at maximum 6% of your purchase price or just inside the box whichever is least.