How To Stay With A Winning Stock
Recently, I discussed money management techniques that could be used
on Healthnet (HNT), a stock mentioned on 06/23/03 (see archives). To review, I talked about how partial profits (half) could have been
taken (a) and the stop could have been raised to breakeven(b)–the same as the
entry. This way, barring overnight gaps, you essentially have a “free” position with
the potential of it becoming a homerun. Further, I was discussing how that remainder could be managed through trailing stops
below support (c) and on a point basis(d). Since the stock continues to move in our
favor, the stop should be trailed higher. In this case, we will continue to use
a 2-point trailing stop(e). As mentioned recently, if the stock continues
higher, a somewhat looser stop could be use to (hopefully) capture a longer-term move. Should this occur, I’ll
continue to keep you posted. Feel free to email if you have any questions regarding money management
and position management.Â
Looking to the indices, on Friday, the Nasdaq opened firmer
and rallied in early trading. It found its high by mid-day and began to chop
sideways. It then sold off in afternoon trading but managed to rally going into
the close. This action has it closing well and keeps it above it recent breakout
levels.Â
The S&P put in a similar performance. It remains below
the top of its trading range/multiple tops.
Looking to the sectors, Friday’s turnaround in tech
seemed to make all the difference in the world. This action sets ups sectors
such as Internet, semis and computer hardware as either pullbacks or high-level
cup and handles. The overall rally also helped to keep sectors such as retail
above their recent breakout levels.Â
On the downside, the homebuilders finished lower but off of
their worst levels. So far, it still looks like a top may be in place here.
Utilities finished lower and appear to be rolling over. Â
So what do we do? I’m encouraged by the fact that
the Nasdaq reversed and is now set up as a first pullback since its breakout.
This action, as mentioned above, sets us many tech sectors. On the other hand, I
am concerned that the S&P remains in a trading range and below multiple
tops. Further, the VIX is hovering near its lowest level in over a year (but so
far, isn’t stretched away from its 10-day moving average). Therefore, in light
of such mixed signals, you might look for opportunities in the
aforementioned tech areas but keep it light until the S&P can show signs of
breaking out.Â
Looking to potential setups, USA Interactive
(
USAI |
Quote |
Chart |
News |
PowerRating),
mentioned Thursday night, still looks like it has the potential to rally out of
its first pullback since breaking out of a high-level consolidation.Â
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“….. Your book on your swing trading method is succinct, straightforward, clear and above all useable. Thank you for the tools it provides. Please write more. You’re not just another writer, you’re a teacher who makes a difference…”
Michael S.
