How To Stay With A Winning Stock
Trail ’em If You Got ’em
Because no one knows exactly where a stock is headed, money
management is crucial to your long-term success as a trader.
On Thursday night, I discussed the fact that Kmart
(
KMRT |
Quote |
Chart |
News |
PowerRating) had rallied nicely since recently mentioned, but did stall out near
its old highs (a). I went on to discuss that by taking partial profits and
moving your stop to breakeven, you have a chance of staying with a position
longer-term should it continue to move in your favor. And if it doesn’t, barring overnight
gaps, the worse you could do on the remaining shares is a scratch. Fortunately,
in our example, it continued to move in our favor–breaking out to new highs
(b). Now that this has occurred, a stop is trailed higher on the remaining
shares (c). Should the stock continue to run, you then continue to trail a
stop higher.
On Friday, the Nasdaq initially rallied but found its high
in early trading. It then drifted lower for the remainder of the day. This
action keeps it above its 50-day and 200-day moving averages and above short-term support (the June lows). However,
it remains in a short-term trading range.
The S&P put in a similar performance. So far, it too remains
above its 50-day and 200-day moving averages. However, it also remains in a
short-term sideways trading range.
So what do we do? Nothing much has really
changed. Overall, the market
continues to hang in there. True, it’s stuck in a short-term sideways trading
range, but so far, it hasn’t done anything “wrong.” I am slightly
encouraged that the semis, at least for one day, appear to be stabilizing.
In general though, based on the overall lack of conviction, continue to trade at a reduced size.
This isn’t a hard decision for me since my database continues to produce very
few meaningful setups. Once again, on the long side, so far, Internet and
retail still look like they have potential. However, wait for entries in light
of recent weakness. On the short side, biotech still looks poised to resume its recent slide out
of a pullback.
No setups tonight.
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. My new 20-hour course is now shipping.
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