Here’s how you trade Netease.com (NTES). (January 09, 2017)
I want to look at NetEase ( NASDAQ:NTES ) today, and here’s why: There are several stocks that look like NetEase ( NASDAQ:NTES ) here. And that is, after a big run like this they pulled back and have been kind of sitting around long enough to form a base; kind of like a step higher like this type of thing. And so as I look at NetEase ( NASDAQ:NTES ) a couple things; first of all, it is above the 200-day moving average but not like super extended, so that is not really relevant. To me the real relevancy here is about 210.00 or so is support. You look at where the stock is trading, it is about 10 percent above where you would put your stop, maybe a little bit more if you are buying this right now.
Now, to me the decisive factor here, as I look at the chart, is the stock has closed above the 50-day moving average and it is on volume. They don’t report earnings for well over a month and so that puts this, for me, in the buy category as a small initial buy. Because look, if the stock comes up to test the high, that is up almost $40.00, there is plenty of time to pack on more stock. But for now the trade for me is to be buying at this level. But because your rationale is that the stock is above the 50-day moving average then I think to have the stop below today’s intraday low, that is 227.50. That is a little bit too snug because the stock can kind of come back to test the 50-day moving average. And if there is any kind of selling pressure on it at all you are going to get stopped out and then the stock may go up without you.
So instead, I would look back at this, don’t take it clear down here it is just too long to hold the stock in a pullback. But instead set about a 4 percent stop, say under Friday’s intraday low say 225.27, set it around 224.00 that way you are not taking a lot of risk. You are putting yourself in a position to make money if the stock moves higher. You can add to the position from a position of strength, that is, a position of profit. So again, you are not risking a lot of money. You have your definition of where your stop is going to be. And then you add to the position if it works for you.