We hope everyone enjoyed the Holiday weekend and a day off from the market on Friday. With March over and spring arriving, I thought it would be a good time to review recent Trade Plans from the Research Lab and chart ideas presented previously on this blog.
Let’s start with the current Open trades from March. NOTE that when these trades are closed they will go into the March stats.
The entry in ACXM appears to be in a pretty good spot and this is one nice looking chart. The yellow ellipse indicates the buy and the yellow horizontal line is the current stop-loss. We are using a very conservative stop on this as would not be out of the ordinary for ACXM to pull back to rising trendline to find support. In theory this little break-out should carry it up through our targets.
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Upon re-evaluation, I think we may have been just a tad premature on CGA. However we like the symmetry and we know CGA typically makes significant moves. A small initial position at the Entry, (yellow ellipse) would ideally be followed buy a second position if it breaks up above the horizontal green line, with the expectation that CGA would meet the top of the triangle quickly. By layering in with two small positions, it would be possible to sell 1/4 at each of the three targets, then hold the last 1/4 for a potential break to the upside of this triangle. A break to the upside could result in a dramatic move, but scaling out at the three Targets will lower the risk considerably.
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PRX seems to the most boring Trade Plan in our history, so far. The first tiny circle indicates the entry. The stop-loss on this one is very tight as well. I have a feeling PRX will make a decision one way or another very soon. Worst case scenario is it drifts down to the stop or falls with an overall market pullback, but the last thing we would want to do is move the stop down to the low back in February as we would not want to tie up capital for any great length of time, and this trade is long in the tooth as it is now. PRX, please make your move one way or the other soon…by the way, take note of the “fundamentals” in the previous post to see why this was attractive at the time.
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IVAN is in an uptrend and near the trendline. Note the entry is “anticipatory”, but the stop-loss is in the perfect spot. We are coming up on decision time as well with IVAN as it prepares to meet the rising trendline. What a great speculation. Keep your eye out this week for any potential spike up which might make for a good trade. We decided to get in early based on the pattern, but we again suggest a 1/2 position initially with an add-on on a move up with volume. Based on the previous moves, if it does decide to break to the upside, IVAN might have legs to the top of the invisible channel we didn’t include.
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So there are the 4 trades displayed above that are still open from last month, and will be playing themselves out this week. When the stops or targets are hit and the system moves them to the Closed Position, we will know the final stats for March 2010.
Ok, let’s recap the Closed Plans for March:
The system closed AUY at break even after it target 1 on the one spike low day that touched the red line, where we included a break-even stop above the actual stop-loss in the plan. The break-even stop was placed exactly the same distance from the entry as target 1, so the trade was essentially a wash. Honestly it looks set-up even better right now and might just make for a good “second try”. However we will not load it in the Trade Plans again as we expect this to be more of a longer term recovery and we don’t want to tie up capital. The yellow ellipse indicates where we would potentially take a position next week, if we were so inclined. This is still a nice pattern and if the downtrend is broken decisively, we see good things for AUY, a nice mid-tier gold miner.
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Below is a very unusual trade and proves we can do ok even if a stock experiences an “unforeseen shock”.
The single day inside the yellow rectangle, CYTX hit all 3 initial parameters; the Entry, Target 1 and Target 2. As outlined on the Help page for the Trade Plans, the strategy is to sell 1/3 at T1 and 1/3 at T2. The stop on the last 1/3 is moved up to the Entry price. If 2/3 of the position has already been taken off, and the last little bit gets closed at the buy price, it’s a nice win. In this case though, CYTX gapped down hard at the open 4 days later and the last 1/3 of the position was stopped out right at the initial sop-loss rather then the Entry. Not really a big deal. But the real lesson here far exceeds the small profit. It clearly demonstrates why we use tight stop-loss orders on EVERY trade. Imagine the feeling a typical “investor” has at this juncture. This is an excellent example of how a carefully planned trade can prevent large losses, even in a stock that collapses shortly after purchase.
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The trade above perfectly demonstrates why we advocate taking incremental profits on all swing-trades, and have set our Trade Plan system up to do just that, with pre-calculated profit targets. The magic comes with position sizing and deciding how you will play the trade. Recently we brought up the idea of taking full profits at Target 1, as the track record shows a much higher probability of each plan hitting it. Bun then again it’s simple math. The frequency of our Target hits logically diminish based on the increased magnitude required on the move. In other words, since T1 is set to 2.5%-3%, an up-move in a stock that hits the Entry is likely to carry up at least to T1, but we set T3 as a “home-run” trade. Does that make sense?
REXX represents the “fake-out break-out”, not an un-common thing. Again, the stop-loss prevented a large loss. The entry was set a bit low and chart was fairly sloppy. At the time the system identified it as fairly high-probability based on the moving averages and other indicators, but the bar for entry was set just a little too low, and it came up just enough to tag our entry without actually breaking-out. That will happen and you see how the stop-loss at the red ellipse once again proved to be essential.
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ARUN was a nice WINNER and hit all 3 targets quickly. Everything was lined up perfect for this trade. Note the moving averages and the trend line break out of the triangle. Target 3 is the horizontal line. While the system has closed the position, it will be one to keep on the watchlist as it has a history of nice up moves after consolidation.
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So that is it for the Opened and Closed trade for March.
Lets review a Trade Idea presented in the March 11th Blog Post:
We joked about this being too speculative to trade but of course we were kidding. The yellow ellipses indicate the two entry points discussed and the question marks show our rough target. We would never load something so speculative into a Trade Plan, but that is why we have this blog. We take a little more liberty here and frequently toss out interesting idea when we see them on the chart.
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Lastly, PCYC was another idea we brought up on this blog 2 weeks ago. It was not loaded as a Trade Plan, but that is one of the reasons I write this blog and why you definitely want to read it each week. The breakout carried PCYC to a high of $6.92, a hit of all 3 targets with our 3-6-9 approach.
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So that pretty much brings us up to the Here and Now. Every chart above is a “recap” of sorts and we want to turn our attention to New Trades for April.
The Trade Plan “system” ran over the weekend and we have several new waiting Trade Plans for next week. We would be very interested to get some input into the price range of the stocks we load in. We are not sure if you prefer low-priced stocks or mid-priced. We try to have a mix along the price and risk spectrum so that you can chose the set-ups that look best to you and are most appropriate for your situation and timeframe.
Speaking of time frames, in the blog next week I will focus on the real-time stock picks and the scanner section of the Research Lab. The scanners are a totally separate module from the Trade Plans and are designed primarily for scalpers and daytraders, but the scans indeed put the “best stocks” on our radar screen each day and can be used for all trading styles and timeframes.
So be sure to log in the Research Lab and click the Waiting Trades link to see what we have on deck for next week.
IMPORTANT NOTE: Be certain you have read the Trade Plan system documentation in the Help section of the Research Lab.
Have a great Holiday weekend and join us Monday morning in the Research Lab for the Live Broadcast.
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