Check out the chart of Sherwin Williams (SHW). What’s the best method of exiting? (October 06, 2017)SHW AMAT BA BIDU SHW
I want to show you Sherwin-Williams ( NYSE:SHW ); more than a paint, it is a stock. Here is the deal: I would not be shorting this stock because I don’t like to short rocket ships. But I will help you get out of this stock when it is right to do so.
First of all, we will look at the weekly chart. This stock had been consolidating basically for a couple years or close to it. This is the way this stock has traded; it has been in an uptrend. You got a little pullback and then now the stock looks like it is kind of coming out of a volatility squeeze. On a weekly chart, a 10 percent width in Bollinger Bands, that is actually pretty narrow. The stock is just starting to come out of here with some force.
If you are an investor, if you consider a quick trade 3 or 4 months and an investment a year or two, hang on to this stock, there is no reason not to. But, if you are a trader and you bought this stock on this pop, on this volatility squeeze, you have got to just look at this objectively.
First of all, the thing that jumps out is this massive volume spike here. The stock traded up well above the upper Bollinger Band. But if you look at the way this was trading since the latter part of last month, look at the Bollinger Band, look how many times the stock has traded outside this upper band, which it is kind of not supposed to do. One, two three times. Four, five, six seven times the stock has been trading outside this upper Bollinger Band as it moves higher. The things that I really want you to look at are the lows, the intraday lows. Here, and then we got a series of them that were higher. So, after this intraday day low here we got four higher intraday lows; we can even go back here.
What I am saying is that the stock is under accumulation you have got buyers here. We have got buyers in here ready to go. At some point that is going to change. If the market retraces a little bit then this move that you made, let’s say you even bought it down here, not the greatest entry, but it is an entry. You are up 7 almost 8 percent. If you want to keep that money what you should do is, track the intraday lows. Right now the current one here is 378.00. This is how I do it on TeleChart 2000 but all your software has the same stuff. Set an alert here, let’s do a week, sell, Boom! So if the stock starts falling below Friday’s intraday low then I am going to want to take profits on this. I wouldn’t short the stock.
I looked at a similar thing here in Applied Materials ( NASDAQ:AMAT ). Over on Option Market Mentor we actually shorted this by way of selling puts, selling way out of the money puts. The idea was that the stock had done a similar thing and then gave us this. So okay, I think it has peaked, and then it trades down and then ultimately moves higher.
Again, you would see a similar thing here with Boeing ( NYSE:BA ). Where the stock looked like it had peaked but it didn’t really pull back too much. It just didn’t pull back like you would expect a stock that has been up as much as Boeing ( NYSE:BA ) has been. You figure, “Okay, well, at some point this trend ends and that looked like it. And now, not so much.”
So, I want you to be watching this type of thing. If Sherwin-Williams ( NYSE:SHW ) pulls back at all below the intraday low, then I want you to go ahead and take some profits on this stock, and then wait for it to reload.