More On How To Stay With A Winning Stock
Trail ’em If You Got ’em
Kmart
(
KMRT |
Quote |
Chart |
News |
PowerRating), mentioned recently (a), has moved nicely
higher since then. When I last left off (see archives), I was discussing taking
partial profits and trailing a protective stop higher on the remaining shares.
This simple money management technique can often help you stick with a winner.
On Friday, Kmart rallied to new 52-week highs. Since the
stock continues to move higher, the protective stop on the remaining shares is
ratcheted up. On a stock of this price and volatility, a 4-point trailing stop
(b) is reasonable. Should the stock continue to move higher, the stop could be
trailed even more loosely. This would allow additional “breathing
room”—creating the chance to stay with the position longer-term.
If you’re new to momentum based swing trading and would
like more information, email me and I’ll be happy to send the primer section
from my second book. In it, I discuss basic techniques such as those described
above. Â
On Friday, the Nasdaq initially rallied but found its high
in early trading and began to sell off. Then, after drifting throughout mid-day,
the selling resumed in late-day trading. Finally, it chopped
back-and-forth going into the close. This action keeps it in a trading range.
The S&P put in a somewhat similar performance with one
notable exception. It sold off hard on the close based on index rebalancing fun
and games. This action keeps it in a trading range too.Â
So what do we do? When I developed my first
mechanical system years ago, I began to think, great, now I just need to filter
out the “bad” trades. That way, only good trades are left.* Although I
have since come back to discretionary methods, I now know that the
“secret” to any methodology is knowing when to back off.Â
Therefore, as I have been preaching, this trendless environment does not bode
well for the momentum based swing trader (notice the word “momentum”
in the description). With that said, as long as we stay stuck in a range,
continue to avoid getting aggressive.Â
No setups tonight. Â
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..Â
*That’s why I only buy used golf clubs. I let someone else get all the bad
shots out of them for me.