Tech Inc (SOHU) : The danger of low liquidity stocks

In my opinion, SOHU is a good example of the risk of trading low liquidity stocks.

From the chart, we can see how it breakout of the triangle and rise to $70+.

After that, look at how the price falls from Sept 16 to Oct 16.

The last push up to $71 from Oct 16 to Oct 23 was the worst. Up almost $10 within 5 days and down$10 the very next……and once that happens, when it break the critical support, it just goes down much further.

I was lucky that I was not trading the stock itself and was trading Iron Condors on SOHU.

2009Oct-Sohu.Com Inc-800x600

Tech Inc (SOHU) : Ichimoku Bearish Cross

SOHU has been making lower high, lower low since September 17.

And yesterday, there was a fairly high volume selldown bringing the price down by more than $2.

The Weekly Chart suggest a support at $62.71  with a fairly thick kumo supporting it below.

While on the Ichimoku Daily Chart, it has just pierce through support at $64.62

If the price drops further, we may see a confirmation with the Tenkan sen crossing the Kijun sen.

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2009Oct-Sohu.Com Inc-800x600Daily

Options Trading TA Tech Uncategorized Inc (SOHU) : A Review of My Iron Condor Play

Previously, it was highlighted that SOHU is forming a symmetrical triangle (many thanks to GR for pointing it out)

And as with symmetrical triangles, there is a chance that it can break out either way.

For me, I took a bet and Short an Iron Condor on SOHU. My beliefs was that it will remain at the same level until expiration.

All went well until Monday when the price breaks through the previous week high and stay above the previous week lows as well.

That should have been my first sign. Unfortunately for me, I was already off to bed sleeping (thinking that it will remain within my range).

Needless to say, on Tuesday, the price continue to surge upward on opening, and I see a fair amount of my profits from the Iron Condor eroded.

I still make a tiny profit from it but it is painful to see 3/4 of the profits being wiped out.

On hindsight, I should have closed off the position on last Friday when it dipped back into the ‘triangle’.

2009Sep-Sohu.Com Inc-800x600