Playbook exercise RHT - Jake H.

1. A Playbook Exercise
By Jake Huska

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No relevant positions
Please note: Hypothetical computer simulated performance results are believed to be accurately
presented. However, they are not guaranteed as to accuracy or completeness and are
subject to change without any notice. Hypothetical or simulated performance results have
certain inherent limitations. Unlike an actual performance record, simulated results do not
represent actual trading. Since, also, the trades have not actually been executed; the results
may have been under or over compensated for the impact, if any, of certain market factors
such as liquidity, slippage and commissions. Simulated trading programs in general are also
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3.  Look at the longer timeframe (daily/weekly)
to identify clear inflection points on the chart.
 For an In Play stock that is gapping higher or
lower, look at the post-market price action in
relation to the longer term price levels.
 The risk/reward can be heavily skewed in
your favor near these inflection points.
 Generally, the greater the range between
these inflection points, the more risk you
need to put on.

4.  SPY was fairly quiet.
 $169.50 had been prior resistance back in
mid September and had acted as support
yesterday. Below $169.50, there was $169.
 Above $170.20, $170.50-$170.65 was the
next micro resistance zone.
 Coming into today, SPY had been down 3
days in a row.

6. ◦ Red Hat has reported a second-quarter EPS of
$0.35, beating the Street's estimate of $0.33 by
$0.02. Earnings per share were up 25 percent from
the same quarter in 2012. Red Hat's revenue came
in at $374 million versus the Street estimate of
$372.11 million. Sales were up 16 percent year-
over-year.
Source: benzinga.com

7.  Looking at the daily chart, $47 was a
potential level of support.
 $45.50-$45.80 was an even bigger level on
the daily.
 1.20-1.50 range between these two inflection
points, which should offer nice r/r
opportunities.

8. The above is a daily chart.

9.  The after-hours/pre-market action was bearish,
as sellers were in control.
 Stock was trading below the after-hours
consolidation, indicating that sellers were in
control on a short-term basis.
 $48 acted as some resistance pre-market, so
looking for shorts near the level made sense with
a point of potential downside until the next
support level.
 Could walk into something bigger if there is a
flush below $47 down towards the bigger
support zone at $45.50-$45.80.

10.  RHT was relatively “clean” on the open with
offers holding lower.
 $47.70 held, then $47.50, which led to a
quick flush below $47 of about 30 cents.
 The stock was pretty choppy later in the day.

11. The above is a 1 minute chart.

12.  I feel like I did a good job identifying the
important inflection points, both on the
longer- and shorter-term timeframe.
 I believe I managed the trade well by covering
2/3 of my position into $47 as well as in
front of $46.30 once I spotted some buying
on the tape.
 I think I did a good job later on when I
reloaded on the short into the retracement
and held it below $47, based on the trade
idea of new lows.

13.  I could’ve tried a bit more to short a small lot
in the pre-market at $48 to be in a position
of strength at $47.70.
 I could’ve done a better job of adding to my
short once it held lower at $47.50 on the
open.

14.  I would continue to use $47 as an inflection
point. Perhaps they will spike it up on the
open, but if it’s sold and clearly holding
below $47, I’d look to initiate a short with the
expectation of yesterday’s lows getting taken
out. $45.50-$45.80 would be my “hopeful”
cover zone.
 Could look to the long side if it’s holding
above $47 and takes out $47.50.