Micro Stock Trader: 8-Step Trading Strategy Execution

Friday, January 10, 2025

Rebalancing Our URC Position: Preparing for the Breakout While Managing Risk

Adjusting Our Allocation to Manage Risk and Capitalize on Upcoming Market Opportunities

As part of our ongoing trading activities using the 8-Step Trading Strategy, we made a strategic decision today (January 10, 2025) to rebalance our URC position. This move involves reducing our allocation from 70% to 65%, with a target of 40% ahead of Week 3 under the right conditions to manage risk effectively while maintaining enough exposure to benefit from a potential breakout.

Why We’re Rebalancing

The decision to rebalance our URC position was driven by current market conditions. Over the past four trading days, the price has been consolidating between Php77.07 (support) and Php80.70 (resistance), showing signs of market indecision. While our 1/3 Zone Action strategy typically recommends adding to positions in this zone, the absence of a confirmed breakout above resistance prompted us to take a more cautious approach.

By initially reducing our allocation to 65%, with plans to further lower it to 40% under the right conditions, we achieve two key goals:

Risk Reduction: Lowering our exposure reduces the potential downside if the price fails to break above resistance and reverses further.
Capital Flexibility: Freeing up capital positions us to act decisively when a confirmed breakout above Php80.70 occurs, allowing us to add back to our position in line with the strategy.

Aligning with Our 8-Step Strategy

Although this move represents a slight deviation from the rule of adding in the 1/3 Zone, it remains consistent with the broader principles of the 8-Step Trading Strategy. Our focus on risk management and maintaining capital flexibility ensures that we stay prepared for future opportunities while protecting the portfolio from unnecessary risk.

Key points of alignment:

Step 4: Entry — We will be ready to increase our allocation once the breakout is confirmed with strong volume.
Step 5: Place a Stop-Loss — Our current stop-loss remains at Php75.85, ensuring downside protection for the remaining position.
Step 7: Profit Take — If the breakout occurs, we will target profit-taking in the upper zones, specifically at Php85.00 (1/3 Zone), Php95.00 (2/3 Zone), and Php104.40 (3/3 Zone).

Preparing for the Breakout

Our analysis indicates that a potential breakout could occur within the next 3 to 5 trading days, provided certain conditions are met:

The price must approach and close above Php80.70 with strong volume.
Volume should increase significantly during the breakout, signaling renewed buying interest.

Until these conditions are met, we will hold our 65% position and adjust further as needed and continue to monitor the market closely. If the breakout materializes as expected, we will be prepared to add back to our position and capture the upward momentum.

Next Steps

Continue monitoring the price action near the resistance level of Php80.70.
Be ready to add back to our position upon confirmation of a breakout above resistance with strong volume.
Maintain our stop-loss at Php75.85 to protect against downside risk.
Target profit-taking at key levels as the price moves into the upper zones.

Conclusion

Rebalancing our URC position is a strategic move aimed at balancing risk and reward while staying prepared for a potential breakout. This adjustment ensures that we remain flexible, disciplined, and aligned with our overall trading strategy.

We will keep you updated on further developments as the market progresses. Stay tuned for our next update!

Disclaimer: This post is for informational purposes only and should not be considered financial advice. Always do your own research before making any trading decisions.

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