Combining Fundamentals With Technicals
When I
first began to daytrade
several years ago,
my attitude about the stocks that I was trading in was that I didn’t care about
the big picture. I didn’t care about the longer-term technical pattern, and I
definitely didn’t care about fundamentals. All I cared about was my short-term
patterns. I would simply run scans to find the setups I liked to trade, pick a
few stocks based solely on the setups, and trade them the next day. (I also ran
some scans in the morning to see what was moving and traded that.) At the time
I thought, “If I don’t know the big picture, I won’t form an opinion about the
stock and I won’t let that opinion affect my trade.â€
After a while, though, I
realized that stocks I was quickly trading in and out of for $2-$3, were going
on to much, much bigger gains in the subsequent days and weeks. (Stocks moved
much quicker back then; a $2-$3 day trade wasn’t a big deal.)
When I began to look at the big
picture with my daytrades, I then realized what I had been missing. Many of the
stocks I traded in also had solid fundamentals and good-looking weekly charts as
well. By making myself aware of this, I was able to begin holding on to small
pieces of my daytrades for longer-term gains. It wasn’t necessary to hold large
positions, or even a lot of them, just a few well-timed purchases could really
help out the account.
In my April 30 column I discussed how intermediate-term traders could have used an intraday
Slim Jim pattern to enter
Gen-Probe
(
GPRO |
Quote |
Chart |
News |
PowerRating), which had gapped up that morning. A daytrader trading the same pattern and realizing that GPRO had just gapped out
of an intermediate-term pattern, and was exhibiting excellent earnings growth
may have chosen to hold on to a small portion of that position and trail it with
an intermediate-term stop. You can see what the results would have been below…
GPRO finished trading today over 100% higher than that Slim Jim entry, and once
it broke that pattern, it never touched that price again. Even if you got
stopped out on the recent sharp pullback below $50, you still made over 60% on
the portion you kept.
A more recent example might be
Celgene
(
CELG |
Quote |
Chart |
News |
PowerRating), which Chris Tyler featured in his Nightly Daytraders Report
last night. Any daytraders playing CELG today should have been aware that
it broke out of 20-month cup & handle pattern today, and earnings have improved
significantly the last 2 quarters. CELG also finished near its highs for the
day, so most daytraders would have had profits going into the close. By hanging
on to just a small portion, moving your stop on that portion to breakeven, and
now trailing it up, you may be able to realize a much, much, bigger gain than
any daytrade would allow.
As far as the market is
concerned, I really have nothing new to say. We are in a trading range…still.
It’s been 2 ½ months now. There are some individual issues acting well on the
long side but I wouldn’t bet the farm until the range is broken. Have a list of
ideas ready for a break in either direction. Same story as before.
Best of luck with your trading,
Rob Hanna