There are only 2 things you should be doing in this market
Dave Landry is principal of Sentive Trading, a money management firm, and a
principal of Harvest Capital Management. Mr. Landry is the author of two top
selling books,
>Dave Landry’s 10 Best Swing Trader Patterns And Strategies and
>Dave Landry On Swing Trading.
If you would like a free trial to Dave’s Nightly Swing Trading Alerts Report
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Smoke ’em If You Got ’em (FINALLY)
As I’ve mentioned in the past (and as Dan from Stain used to sing, “it’s
been a while!”): 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
(i.e. trail) 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 Gollinhas Aereas Inteligentes
(
GOL |
Quote |
Chart |
News |
PowerRating), mentioned
recently in my trading service and in last Wednesday’s interactive presentation
(email me if you need copies of either). In this case, based on the rules of the
primer (as usual, email me if you need a copy of anything mentioned), a 2 point
protective stop and initial profit target was used. Notice the stock triggers an
entry and within a few days rallies nicely to the profit target. Partial profits
(half) could (and should!) have been taken and the stop on the remainder was
bumped up to breakeven. Again, barring overnight gaps, this simple money
management plan gives you a “free” position with the potential for it
to turn into a home run.
I’ll follow up on this one–good, bad, indifferent–in future
columns/presentations.
On Friday, the Nasdaq tried to rally early on but then traded sideways
to lower. This action keeps it stuck in a sideways trading range (I forgot to
draw the arrow, draw it in if you’re playing along at home).
The S&P also traded lower after showing some initial strength. This
action keeps it in a sideways range too.
So what do we do? As a momentum player (aka a
“Trend Following Moron”), in a sideways market, you have two options
1) don’t trade or 2) trade in commodity related areas that can trade
independently of the indices. As far as the later, the energies and metals are
in uptrends and look like they have the potential to resume those trends out of
pullbacks.
As far as setups, Grant Prideco
(
GRB |
Quote |
Chart |
News |
PowerRating), in the strong
energy-oil service sub-sector, looks like it has the potential to resume its
uptrend out of a pullback. Wait for an entry though since it and the rest of the
energies were down on Friday.
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. If you would like a free
trial to my trading service, click
here.