Here’s a simple technique to lock in gains,…and also a look at Apple (AAPL). (March 22, 2013)
QCOR AAPL
I’m Dan Fitzpatrick at StockMarketMentor.com. Here’s our Free Chart of the Day, or the weekend, for March 22nd-23rd. We’ll start with the Questcor ( $QCOR Questcor Pharmaceuticals Inc ). You know this was a short squeeze that I’d been covering for a while, looking for it to break out above the 200-day moving average, and it did. But what happened on Friday, heavier than average volume, definitive, decisive reversal. This is a good reason why we use stops, particularly on these momentum names. Now one technique, and I’ve talked about this before and I’m going to talk about it again. When you’ve got a stock that you really feel is trending higher, like it’s in a pretty powerful move, use the prior days intraday low, which by definition is the indication of the maximum power of sellers. Sellers could not push the stock down one more penny than the intraday low. Use that as your reference for the trend, because if you look here we have this low here, higher lows for three days in a row. It doesn’t work all the time, but on these high trending stocks, these strongly trending stocks, and you’re in a momentum name, it sure does work well for me. Anyway, If you just use Thursday’s intraday low of $34.30, you know you wouldn’t have got out at the exact top here which is $36.50 or so, but you wouldn’t have been holding it for $2.00 down. So try to use this, it’s a really good way to manage your high momentum trades and also you look at the shorter term charts and you can see on this five-minute, this was a parabolic move, absolute parabolic move. Volume, very high right here, finally, when it peaked out lower, a lower volume even though the price was higher, after this the stock got real drifty. That was an indication that this trade was basically ending or at least in trouble, so we saw what we got on Friday. Now what are you going to do? Are you going to rush in and buy this stock? I really wouldn’t, and it’s simply because when I looked at this trade from day one I saw a really, really high short interest and I saw stock that was itching to breakout and that’s what it did. Now it’s pulled back. I’m not going to find a different way or a different reason to own this stock just because I made money on it before. What I will do is look at a stock like Apple ( $AAPL Apple Inc ), which is finally broken above the 50-day moving average. The real tell for this stock will be on the next pull back. If it pulls back I think you’re going to see a lot of folks coming in, a lot of money managers saying, “Okay, it’s safe to go back in the water, I want to buy some Apple ( $AAPL Apple Inc ),” and the stock could just keep going higher. But if it does pull back the real key indicator will be if it tests this low. I don’t think it will test this low. If the stock pulls back at all my bet is that it’s going to bottom out, it’s going to create a higher low, it’s going to set a higher low than this one, and that’s going to be your signal that it’s time to get long Apple ( $AAPL Apple Inc ). No, you didn’t catch it at the exact bottom, but you didn’t catch these bottoms either. You waited for the stock to show it’s hand, that’s what it’s doing. So I think you’re going to be looking to buy Apple ( $AAPL Apple Inc ) or buy more of it if you are already own it, and I think this is going to start working. Okay members get over to the Weekend Update; middle video, we’re looking at some of the IBD 50 again; I’ll see you there. Free Chart