Happy Trails To You
Smoke ’em If You Got ’em
As I’ve mentioned in the past: Money management–the use of protective stops, trailing stops, and profit taking–is crucial to your long-term success as a trader. A simple money management system is to take at least half of your profits when they are equal to or exceed your initial risk. You then move you protective stop on your remaining shares to breakeven. This way, barring overnight gaps, you have a “free” position that has the potential to turn into a homerun (through the use of trailing stops).
Let’s follow up on recently mentioned the Biotech HOLDRS ETF
(
BBH |
Quote |
Chart |
News |
PowerRating). Based on the
rules outlined in my swing trade primer (as usual, email me if you need a free
copy), notice the stock triggered an entry (a) and then subsequently rallied
over 6 points to
hit the first profit target (b). The protective stop is moved to breakeven
(c)–the same as the entry. As you can see, you now have the potential for a
homerun And, barring overnight gaps, the worst you could do is breakeven on the
remaining shares.
Happy Trails To You
Talisman Energy
(
TLM |
Quote |
Chart |
News |
PowerRating), also mentioned recently, has been one lucky
charm. When we last left off, we were discussing money management similar to BBH
(in fact, you’ll notice I pretty much just cut and pasted the text above from
last Wednesday’s column). Notice that the stock has continued to work its way
higher. When blessed with a potential homerun like this, continue to trail your
stop higher. I’ll continue to follow up on this one in more detail in
Wednesday’s interactive presentation (see below).
Housekeeping
FYI, Talisman was covered in more detail in last week’s audio/visual presentation.
Email me if you would like a free copy to this and the prior year’s archives (covering topics such as entries, money management,
psychology, patterns etc..). Also, on Wednesday, I will be doing my weekly
interactive show. Get your questions and stock list together and join me
live.
On Monday, the Nasdaq traded back and forth in a fairly narrow
range.
The S&P put in a similar performance.
So what do we do? I remain concerned about the upward
“drift” in S&P–and now the Nasdaq too. As mentioned recently, I’d
like to see these indices accelerate higher. The sector action still looks
pretty good though. Although some are losing momentum (like the market itself),
most still remain in nice uptrends. Therefore, so far, so good. This is keeping
me cautiously optimistic. On the long side, continue to focus on strong areas
such as biotech, retail, semis, telecom, energy, and metals & mining.
However, make sure you wait for setups (pullbacks) and entries. On the downside, HMOs
still look poised to resume their recent rollover.
No setups tonight. If you took recent recommendations such as those
mentioned above and Neurocrine Biosciences
(
NBIX |
Quote |
Chart |
News |
PowerRating), make
sure you are practicing proper money management.
Best of luck with your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. Learn my newest and most advanced version of my Bow
Ties Strategy. Click
here for details.