Wednesday, May 27, 2015

Investing: Looking Back To Get Ahead

This month we've examined the importance of monitoring positions and back testing your investment system.  As a part of this I gave you a beak down of one of my recent winners as well as one of my recent losers.

Investing: Looking Back To Get Ahead


Looking Back To Get Ahead

In this post I'm going to put it all together for you by giving some insight on all of the stocks I've highlighted over the past 4 weeks.  We'll look at the winners to see why they won and to find ways of identifying similar stocks in the future.  We'll also look at the losers to see why they lost and how you can avoid others like them in the future.




Let's Start With The Winners
  • VRX (5/4) and REGN (5/11)
    • Why they Won: Both of these stocks were winners for the same reason - they maintained momentum!
    • How To identify similar opportunities in the future: VRX and REGN both traded at or above their 8 day EMA which is a clear indicator of momentum.  This is something to watch for when charting a growth stock.
  • ANTM (5/18)
    • Why It Won: When reviewing the chart I see that this stock crossed its resistance lines on the 15th while the stock was moving in an upward channel.
    • How To identify similar opportunities in the future: ANTM had 4 days of sideways movement on the 50 day EMA, but it never dipped below that.  After those 4 days, it broke out with massive volume - over 300%!
  • MLM (5/18)
    • Why It Won: This one broke out from the 50 day line for 2 days in a row with massive volume.  That gave this stock the shot in the arm it needed to hit profit.  
    • How To identify similar opportunities in the futureWhen compared with its parent sector ETF, this stock had all of the positives of the sector, but didn't experience the negatives.  It moved sideways instead of dropping below the 50 day line which is a clear sign that this was a true growth stock.  

If you have trouble putting together a solid watch list (or if you just don't have the time to do it), I offer access to my weekly watch list for just $4.99 which you can sign up for below:


Looking Back At The Losers
  • ULTA (4/26)
    • Why It Lost: Quite simply, the sector tanked right as this stock was poised to break out.  ULTA still outperformed its ETF so it was worth keeping on the watch list.
    • How To Avoid This: Pay very close attention to sector strength to avoid getting getting into a stock at the wrong time.
  • XLE (5/4)
    • Why It Lost: Macroeconomic pressure was a major factor here.  Unfortunately, this is a common variable with this sector.
    • How To Avoid This: Given the volatility of this sector, it's best to take a smaller position, or, utilize an options trade to limit risk.

    The Undecideds
    • ORLY (4/26) and USO (5/11)
      • Why They Haven't Tipped The Scale: These stocks have moved sideways but they're still within my allotted 40 session time frame to demonstrate a win or a loss.  
      • Remember to plan for 3 exits with every trade; an exit for profit, an exit for stop loss, an exit for timing.
    If you struggle with pre-planning your entries and exits, I also offer a weekly trade plan service for $9.99:



    Have you ever wondered what type of investor you are?  In June I'm going to talk about the differences with the 3 most common trading persona's.  To kick off this discussion I'm going to be sending out a survey and we'll break down the results here on the blog! 

    Happy Trading!




    DISCLAIMER



    Do not take a position unless you are prepared to sustain a TOTAL LOSS. Your loss could include the money you invested as well as commissions and transaction charges.


    The Information I provide is for education and informational purposes only. The Information provided is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The Information provided is general in nature and is not specific to you or anyone else.


    YOU SHOULD NOT MAKE ANY DECISION, FINANCIAL, INVESTMENTS, TRADING OR OTHERWISE, BASED ON ANY OF THE INFORMATION PRESENTED WITHOUT UNDERTAKING INDEPENDENT DUE DILIGENCE AND CONSULTATION WITH A LICENSED PROFESSIONAL. You understand that you are using this Information AT YOUR OWN RISK.