You’ve got a huge profit, now what?
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
I’m getting swamped with emails on what to do with
Neurocrine Biosciences
(
NBIX |
Quote |
Chart |
News |
PowerRating),
a stock I recommend recently in my trading service. I plan to answer each and
every but was just asked to do a quick update first.Â
As you know, the stock gapped sharply lower this morning–over 20 points in
excess of the initial profit target. This created nearly a 50% gain overnight.
In a situation like this, you should lock in at half of your profits immediately
(1). You then have the luxury of deciding what to do with the remainder.
Ideally, you want to hold on to a piece for a possible longer-term move.
However, keep in mind that after an extreme move like this, the stock will be
prone to a sharp retrace. Therefore, look to possibly exit more shares
intra-day–an intra-day trailing stop works well (2). Notice that in this case,
so far, the stock has moved another 3 points in our favor. On the
remainder, set a fairly loose stop (3)–again, knowing that a fairly sharp
retrace will be likely. Â
The bottom line is that in a windfall situation like this, you need to
lock in the majority of your gains. Then, hold on to piece of the
remainder to hopefully participate in a longer-term move.
This example gives us a multitude of lessons. I plan on covering these in
detail in Wednesday’s interactive presentation. Email me if you need
instructions on how to join or check the schedule on the swing trading page.
Back to your emails….
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.