I actually show it closing at $4.36, which is about 12% less than you have it at.
My concern would be that the market has already adjusted for that news, and the only thing they might hear from this point out is that they are bankrupt, which would be good for you, or that the Fed gave them a bazillion bucks, which would really be bad for you.
If I were entering the trade for tomorrow (Monday), here's how it would go for me:
Sort of confusing, I know, but I hope this helps you understand how I do this stuff.
- Take your entire portfolio account balance. If it is under $30k, this stock is too risky. If it is under $50k, risk 3% of the value. Under $250k, risk 2%. Over $250k, risk only 1% of account value.
- Multiply the account value by the risk percentage. So, if your account is $72,000 you'll risk 72,000 x .02 = $1,440.
- The difference (today) between the close ($4.36) and the stop ($7.18) is $2.82. This is the risk per share.
- I take $1,440 and divide it by $2.82 to get the number of shares to enter the trade at. In this case, 510 shares.
- To protect myself from really bad news, I'd set a limit at about 97% of today's close. So, $4.36 x .97 = $4.22.
- I'd place a Short Sale order for 510 shares with a limit price of $4.22 tonight, for Monday's trade. This means that, if your trade executes at $4.50, you'll sell $2,295 worth of stock, not $1,440. If the price then climbs to the Stop Exit of $7.18, you'll lose about $1,367 -- close to your risk of $1,440.
- Each day, I'd review the Stop, and reduce it to my new value. My report comes up with this, so you'll need to use another method. My suggestion is to allow no more than about 35 trade days to exit this position. So, divide the $2.82 risk by 35. You'll get $.08 per trade day. So, every trade day, reduce your "Stop Exit" by $.08, and reduce your total risk by about $41.
- In the meantime, you'll want to plan a Profit Exit. I use 15-20% of the entry price. So, assuming you get into the trade on Monday at $4.50, your Profit Exit will be somewhere between $3.60 and $3.82. When the price drops to that range, exit the trade and walk away with your profit.
- In this case, you'll see your risk is about 65% ($2.82/$4.36) of the entry price, but your reward is only 15-20%. The nice thing is that momentum, both of the market and the stock, is in your favor to hit the 15-20% before the 65%.