Tired of missing the high fliers? Try bracketing them. Let’s check out SCTY, TSLA and SOHU.
Discussed in this article: SolarCity Corporation ( $SCTY )
I want to look at SolarCity ( $SCTY SolarCity Corp ), particularly just this pattern because I want to show you how you can trade gap and avoid missing swings like this nice 26 percent gain in today. I’ll take that pretty much any day; I’ll take that even just once a week.
Here’s the thing, the company announced earnings after the bell, and then this is the way it traded the following day; all over the place, basically it just went up a little bit below the close the prior day, but really looked like that was the end of the momentum. Well over the next couple days the stock just kind of stabilized here, and by the way, pay attention because there’s a lot of stocks out there that are giving you this pattern but haven’t yet done this. I’m going to show you how to catch these patterns without having to watch your screen all day.
It’s real simple; after the stock stabilized like this and you looked at it and said, “Okay, well I don’t think this was a blow-off top because first there’s not that much to blow off, it had been trading sideways for quite awhile so the volatility was just expanding into the upside and then we get this big break of momentum. Over the next three days this stock just stabilized.” Now there have been so many things that are working in this market that it’s fine if you missed this move.
But here’s how you can avoid doing it in the future. Set a price alert. We can look here, on this day, Monday, the high, I don’t care about what the close was; the high was $39.00. Since that high the highest the stock went up to was $36.50. So you don’t want to set a price alert at $39.00 because by the time you’re getting the price alert the stock’s at $42.00. Look, $39.00, set a price alert, and all trading software has price alerts, if a broker doesn’t have the ability for you to do an online price alert then you need to find a new broker. Set a price alert for $38.00, maybe even $37.50, about $38.00.
What you want to do is be notified in advance, you don’t want to put in an auto order where the stock hit’s $37.00, you buy; it would have worked here but there’s a lot of times when that wouldn’t work, but you least want be given a heads-up that the stock is about to test this high. You can then look at the stock, watch it move, and get most of this move. What you’ve effectively done by setting the price alert on this stock is hire a trading assistant, only don’t have to pay for their health insurance, you don’t have to pay him anything and they’re not going steal anybody else’s lunch in the company coffee room because they’re not really an employee; it’s a price alert.
Here’s another stock that you can do this on right now; Sohu ( $SOHU Sohu.com Inc ). This company has been on fire, this stock really, really screamed, it looked like finally it stopped going up, the high here was 66.14. After this kind of move from $50.00, out of the volatility squeeze, up to $66.00, the stock only traded down twice on two days. So if you want to check it out and make sure that you can at least get notified if this upside momentum continues, simply set a price alert based on this high, 66.14, set it at about $65.00 maybe $65.50. It looks to me, as I look at Sohu ( $SOHU Sohu.com Inc ), that the price will probably consolidate a little bit, but you don’t care what I think. Wait till the stock tells you what it thinks. So set a price alert here and then if the stock starts moving up, you’re drawn to it, and if you are a momentum trader, if you’re an active trader you can take this stock for more upside.
How about Tesla ( $TSLA Tesla Motors Inc )? Look at this one; you can see the movement it made. If you didn’t see it you were on vacation because everybody was talking about Tesla ( $TSLA Tesla Motors Inc ). Heavily shorted stock, the stock gapped up, traded lower on the day, big, big volume. This looks like the end of the move, right? Well perhaps it is, but not so fast Horshack. The next day there was no continuation to the downside, stock traded a little bit lower, but then closed for a higher close relative to the prior days. So this stock is still in play. I wouldn’t buy right now because I don’t like to gamble, I’m a trader, I’m a risk manager, I don’t gamble. If I buy the stock right now I guarantee it’s going to go down to $70.00, because that’s what happens when I speculate on something like this.
Instead what am I going to do? I’m going to set a price alert. The high here, $97.12, Friday’s high, $94.44, so why don’t we set a price alert at about $96.50, in fact let’s make it $96.00. This is how we do it here on TC2000; price alert, I want to make sure I’m getting this puppy so I want this thing firing off every minute. Now I will know when Tesla ( $TSLA Tesla Motors Inc ) is starting to reach this buy point and then I can come and watch it. By the way, if you’re still long, and you’re concerned that maybe your overstaying you’re welcome, then set a price alert just below Friday’s intraday low of $87.50. If the stock starts falling below that you don’t really want to stick around so we’ll do the same thing. Here, let’s also make it one minute, why not. Let’s just set it at $87.40. Okay, that’s about it. Now we basically got this stock bracketed.
Guess what you can do now? Move on to something else. You’ve got Tesla ( $TSLA Tesla Motors Inc ) bracketed, that would have worked with SolarCity ( $SCTY SolarCity Corp ), you’ve got Sohu ( $SOHU Sohu.com Inc ) at least the top lined out on a price alert. If you start using price alerts you are going to find out that your research is good. Your research is going to be a lot more robust and it’s going to make you more money and here’s why. I’ll ask you one question. How many times have you been going through the market, looking at stocks, saying to yourself, “Wow? This thing is about to move, I think I better buy that. Or I’m going to watch this stock and then if it starts moving higher, or if it starts selling off, or whatever the case may be; then I know just what I’m going to do.” Then you lose track of it, only to look at it later and realize the thing did exactly what you thought it was going to do, you just missed the move because you were looking elsewhere.
So I want you to hire your trading assistant by way of price alerts. You’re going to trade better, I promise you.