Don’t see a trade right now? Bracket one with alerts. Check out Centene (CNC) (October 19, 2018)
CNC XLV CNC
We have a really, really choppy market here but one of the stocks that I have kind of an eye on here is Centene ( NYSE: CNC ); you can see it is in the Health Care Sector ( NYSEARCA: XLV ). the Health Care Sector ( NYSEARCA: XLV ), this ETF, it has actually been a good performer until recently; you can see what’s happened here. There is a little bit of trouble in River City, but it has actually been holding up a lot better than most.
I am looking at a stock like Centene ( NYSE: CNC ) compared to the overall sector that’s kind of weak so this could then be a good opportunity for us. It needs to tighten up a little bit more. In fact, I have just tightened it up; the Bollinger Bands were set at 3 standard deviations now they are just set at 2. This is really kind of technically in, what I would call, a volatility squeeze. But I still need to see a little bit more work done here because you can see a big up day here and then a corresponding down day a couple days later. So this is still in this trading range.
Here is what I would suggest doing on this quick idea here: This recent high here from Friday is 147.00 so why not just set an alert at the line, which I will make right here. There is no way I want to be long this stock; I might set another alert just to keep an eye on it. You don’t have to use these lines, you can just right click and set the alert on TC2000 but I like to draw the lines so I can kind of see what I was thinking.
Anyway, I have set these two alerts on a stock that is in a squeeze and I have got it bracketed. I don’t have to think about this stock again until one of my alerts goes off. If it is down here, if it hits this one then I am going to be looking at that and I am going to be saying, “Okay, is this potentially kind of an early entry? I see where it has broken down below the 50 and that’s fine. I can’t predict here on Friday what it is going to look like next week or the week after that, whenever when it comes back down to here. But I can at least ask my trading assistant, which is this line, I can ask my trading assistant to let me know when it hits this line.”
So then I look at this, if it starts to look like it is rebounding and if volume looks really good then I might take a starter position here and then keep a stop very, very tight stop, like less than 2 percent. If I can get it down here, somewhere down here, take a starter position, a very small position to give me an early jump on it with hardly any risk at all. And then when the stock, if the stock starts moving up it hits the alert on the upper end, that’s when I add to the position. So I am backing into this trade by not even making a trade. I am setting a couple alerts; I see this stock trending sideways just not the right move yet. I would actually prefer not to be buying a breakout here because the stock is kind of extended, still above the 200-day moving average, 20 percent.
It might not seem like that much but this is a healthcare stock, it’s not an Internet stock or something, so it just can’t get too far out of whack. I would be concerned if the stock just jumped up here. I think there would be a higher risk of a gap and crap. The stock comes up here and then slams back down and gives me a loss. I am crossing my fingers and hoping that the stock pulls back here. My alert fires off and then I can look at this and consider starting a position. You don’t decide in advance exactly what you are going to do. You decide in advance to look at the stock and consider a plan that you making when it does a certain thing. So don’t trade robotically just trade with a plan and there is a difference.
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