20 Points In SNDK….Thank You!!!
I love to trade high momentum stocks after they have run into
a bit of trouble. Since I prefer position trades that last a few weeks, the
weekly charts seem to work best for finding these patterns.
As an example, JP in the TM
chat room brought SNDK to our attention back in early December 2005. Although
the stock looked like it was struggling on the daily chart, the weekly chart
showed a pullback to the 20 ema. The daily chart showed price below the 50 sma,
but the stock seemed to be finding support around 47-50. The daily chart was
also starting to give a MACD bullish crossover. Pullbacks to the 20 ema on
weekly charts are my bread-and-butter pattern. So when we had a little closing
price reversal on the weekly 12/9/05 bar with price supporting at the 20 ema, I
bought the following week on a breakout above the closing high of the previous
week, a price of 50.
My goal is to hold as long as I possibly can, so as not
to second guess or whipsaw myself to bankruptcy. The stock looked great on the
weekly chart through the close of 1/13/06. However, two factors that week were
telling me that it was time to head for the exit. First, we were getting a major
double top in MACD on the weekly chart. Also, the closing price reversal of the
1/13/06 weekly bar that week gave me a signal to exit on any break of the low of
the 1/13/06 week, a price of 72.26. Once I get that signal, I never second guess
it because I would rather be safe than sorry. So, on 1/17/06 I was out of the
stock with almost 22 points of profit. My two main rules of thumb in charting:
always look at the next higher time frame because it gives a better perspective
of where we are in the trend; and the Larry Connors rule, buy pullbacks.
Especially weekly pullbacks!
Have fun trading,
Jip