Buy Jan 30 calls for 1.30.
Stop loss is a close a bit below point C.
+ The “IBD Bounty”, a very simple breakout system.
Updated February 9 2014
Apologies — I mixed up 2 posts. The above chart is correct, but the ticker should be TSN. I am deciding, that for this strategy, that stop losses triggers when price goes down significantly for a few days. To the point it’s very unlikely to ever be profitable. Assuming the environment is basically a bull market. The reason why is the call that cost 1.30 could have been sold for at least 2.50 in January. Instead, it was sold for about a 50% loss.
Bought March 2014 50 call for $300.
Stop loss is a close below 47ish.
Partial profits target is new highs.
The “IBD Bounty”, a very simple breakout system. Watching AWAY.
Updated January 6, 2014. +3%
Decided to sell for a small profit a few trading days ago. (Sorry, just catching up now — normally I post trades in near real time.) There were 3 past times the position could have been (partially) sold for a bigger profit. But that did not happen since I was “waiting” for a bigger move.
There will likely be significant volatility, but stocks are headed much, much higher. Specifically…
- There is general upward pressure on stocks due to the fact USA stocks are denominated in a fiat currency that generally has 2% or more monetary inflation per year. So on average, stocks should rise at least 2% per year.
- Because the fed / gov keeps printing, and very likely can’t stop, the simplest thing to do is ride the trend of monetary inflation: go long real stuff.
- Great stocks are the IBD Top 50 and their other indexes like the 85-85 (up 12 times the S&P 500 since November 2000).
The lists change weekly, and who wants to go long 100 stocks, sometimes at a local top? So select those that have been resting a bit (month or 2), and buy when they leave that base.
- Enter when Trader Vic’s near or medium term down trend line is broken to the upside. This is the catalyst. Trading above a significant reference point tends to “show” price wants to go up more than down.
- Buy shares, or in-the-money 6 month calls. These are momentum stocks. If they haven’t gone up after a few months, something is not right.
- Initial stop loss below nearest low, or rising trend line, or EMA’s.
- Exits. 50% at first resistance, or a big gap up, etc., the rest with a close below the 20 EMA.
- Postion size: Risk/use 5% of available capital.
Update 1, October 5:
– Entry: Why wait until the trend line is broken? Buying the stock around point 1 would have resulted in a 15% drawdown. And if the overall market had gone lower, this stock could have gone much lower. Note that because a new low was made the trend line is redrawn (blue).
– The ABC correction is ubiquitous. It flushed out the weak hands. Chances are about 50/50 the correction is over. AWAY’s correction so far seems to be a complex correction. That’s okay. Not breaking the trednline to the upside kept us out of the position.
– Initial stop loss: Note price never closed below lower support (point 2).
– Options verses shares: Shares would have resulted in a 15% drawdown. For 100 shares, that would be about $450. (Maybe much more. Stocks like this can drop substantially.) A JAN 2014 30 call options would have cost about $450 and right now is worth about $285. In other words, long dated at or in the money options can reduce risk.