Ticketmaster (TKTM)

Here is an opportunity I have been looking at. For any trade I am looking at I am trying to answer the following five questions.

1) What should I buy?

Ticketmaster (TKTM) - because the stock chart looks interesting.

2) How much should I buy?

I would buy enough so that the entire position was 20% of the portfolio (talking trading capital here not long term hold.)

3) When would I sell?

I am looking at this in a swing trading time frame - i.e. 1-3 weeks, so my target would be the previous relative high around $10. If the stock did not hit that price within 10 trading sessions - it will be sold regardless of whether or not it hits target (this means both a price target and time target).

4) How would I manage my risk?

I would go long at the market price tomorrow morning and set a stop loss @ $5.35. I would have an estimated maximum loss of $1.10 per share, which works out to approximately 18% of the position. Because this position could theoretically be 20% of portfolio - my maximum loss on this position would be 18% of 20% or 4% of my entire portfolio. That is probably on the larger side - swing trading positions should shoot for closer to max loss of 1-2% of portfolio to avoid risk of ruin - assuming positive edge in strategy.

I would also move up my stop loss to break even if the position moves in my favor during the first 3 trading sessions.

5) How woud I measure my results?

I would look at the risk reward ratio. I have potential loss of $1.10 and potential gain of about $3.90 - giving a risk reward of 3 to 1. Not great, but better than 2 to 1 and good enough to take the trade.

I would also measure my results by my ability to follow the rules setup and to manage my risk if the trade becomes successful.

6) - ( really just five rules) This question is what does all this look like? Here is the graphical representation: