How To Stay With A Winning Stock
Trail ’em If You Got ’em
Lately, I have been discussing possible money and position
management techniques on Valero Energy
(
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PowerRating), a stock mentioned recently.
When I last left off (see column archives), I was discussing taking partial
profits and moving the protective stop on the remaining shares to breakeven.
This way, barring overnight gaps, you have a “free” position that has
a chance of becoming a longer-term homerun. Since the stock has continued to
work its way higher, the protective stop is ratcheted higher. Three points
(below the closing price) is appropriate given the stock’s volatility and
price level (higher priced/more volatile stocks tend to move more on a point
basis).
One again, as mentioned recently: If you’re new to momentum-based swing trading and would like more information on the basics such as trend, entries, and money/position
management, email me and I’ll be happy to send you the primer section from my second book.
On Friday, the Nasdaq opened firmer and began to rally but
quickly found its high and began to sell off. It found its low around mid-day
and then chopped back and forth for the remainder of the day. It remains below
its recent trading range/50-day & 200-day moving averages.
The S&P found its high early and then chopped sideways
for the remainder of the day.
The 200-day moving average could be the next stop
here.
So what do we do? Since the indices are
pulling back a bit, now’s a good time to begin looking for shorts. Previously
strong areas that are breaking down could offer more opportunities than those
already trading at low levels. My theory is that these stocks have further to
fall–the potential exists to catch a trend transition early. On the
long side, continue to focus on those sectors that can
trade independently of the indices. Defense and metals & mining are two
areas in strong uptrends that fit this category. The energies, mentioned
recently, might also be worth another look, on their next pullback.
As far as setups, Mercury Interactive
(
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PowerRating) looks
poised to resume its meltdown out of a First Thrust (as usual, shoot me an email
if you need the rules for the pattern). Note: since the entry is so far away,
aggressive traders may look to play an opening gap reversal or a breakdown of
its morning range.
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.
Click here to learn
more, or to order..