Here’s The Bet I’m Making On Google
Hey Dave, What About Google?
Google will make its high on its first day of trading and
never see that high again. If it doesn’t, I’ll eat my hat (live on a webcast).
Knocked Off The Trail
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 Amazon.com
(
AMZN |
Quote |
Chart |
News |
PowerRating), a stock
mentioned recently. When we last left off (see column archive from 07/23/04), we
talked about taking partial profits, scaling out on a windfall move, and
trailing the remaining shares with a loose trailing stop (4-points on a closing
basis)
to help capture a longer-term move. On Tuesday, Amazon rallied to hit this stop.
As you can see, money management helped to turn what started as a swing trade into a nice
intermediate-term play.
Get Ready To Smoke ’em
Based on a 2-point initial profit target,
BJ Services
(
BJS |
Quote |
Chart |
News |
PowerRating),
a stock mentioned recently, looks like it has the potential to take out that
level on Wednesday. If you played this stock, make sure you take partial profits
(if offered) and lower your stop on your remaining shares to breakeven.
If you’re new to momentum-based swing trading and would like more information on the basics such as trend, entries, and money management , email me and I’ll be happy to send you the primer section from my second book.
On Tuesday, the Nasdaq initially rallied quickly found its high and began to
sell off. It found its low by mid-day and then chopped back-and-forth for the
remainder of the day.
Ditto for the Ps.
So what do we do?
The Nasdaq is set up
as a pullback from lows. The S&P is set up as a pullback from lows. The Dow
is setup as a pullback from lows. And, many sectors are set up as pullbacks from
lows. Therefore, as a momentum trader who trades mostly pullbacks, I would have
to say that the path of least resistance remains down. Continue to focus on the
short side.
Teva Pharmaceuticals
(
TEVA |
Quote |
Chart |
News |
PowerRating), in the weak drugs (and if
you’re like me, when you need drugs, you don’t want weak ones!), looks poised to
resume its downtrend out of a pullback.
Best of luck with your trading on Wednesday!
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.