Are you getting a bad case of the “Can’t Help It’s”? Here’s how you solve that problem with Square (SQ). (November 21, 2017)


We are going to look at Square ( NYSE:SQ ) here. You could change the ticker to l-a-t-e, like late. If you are looking at buying Square ( NYSE:SQ ) right now you have got to understand this thing is just absolutely parabolic now.

The thing is, we have to look and see this volume. Huge volume, climax volume, which is almost as high as it was back here when the stock initially broke out in February below $20.00. You didn’t get it then, you didn’t get it here or maybe like me you got it here and then you sold too soon, for reasons that escape me. And so, you didn’t get in and you are looking to buy this stock. You were thinking about buying it yesterday but you didn’t. You were thinking about buying it last Friday but you didn’t. You have been thinking about buying it all the way up but you didn’t. And finally you have got this bad case of the ‘can’t help its’, you have got to get Square ( NYSE:SQ ).

So here is what you do: If you really need to get this stock; and this works for virtually any stock as long as it is not a stock that is doing this, that is just going all over the place. If you have got a stock Square ( NYSE:SQ ) that is just kind of walking up, basically sprinting up the upper Bollinger Band and these Bollinger Bands look like bugles, where they are just spreading away from each other, that is a strong stock.

So here is how you trade it, it is actually pretty easy: Go ahead and buy the stock. Pay attention to the lows of the day. This was a low right here at $35.00. You want to buy the stock. Let’s say you buy the stock here on each successive day, you are buying the stock there, you are putting your stop below the prior day’s low of 35.00. Well then let’s say you didn’t get it there maybe you are going to get it here when the stock is at 40.00. Walk back a day, put your stop there. That doesn’t work; maybe you are going to get it here at 40.00, fine. Walk back a day and put your stop there.

What I am saying is, that no matter where you are buying this stock you look at the prior day’s intraday low and that is your reference for a stop. This is only a technique specific to chasing stocks. It is not a technique for any kind of trading or, “Oh you say to put your stop below the prior day’s intraday low.” If you use that as a stop methodology for all of your trades you are going to go broke very slowly one stop at a time. I am talking about using this for a specific stock that is exhibiting this characteristic of just running away. It is the type of thing where we literally don’t know whether it is going to peak tomorrow at $48.00 and come crashing down. Or whether it is going to continue higher to $68.00 before it corrects. We just don’t know.

So you use this technique. You are buying it here; you are setting your stop down here. Oh, instead you are buying it here. You are buying it here, you are setting your stop where? Down here. If you are buying it at the end of the day set your stop at the low of the same day that you bought it. Anyway, so you are just gradually walking up your stop. So now we are getting to the heart of the matter. You are going to go ahead and buy Square ( NYSE:SQ ) tomorrow at $48.00. Again, I can’t do it, it is so tempting to do it but it goes against my discipline and so I am just not going to do it, as much as I want to. But somebody is going to be buying it tomorrow. It traded 28 million shares today, some of those folks will show up again tomorrow.

If you are buying it tomorrow, whenever you are buying it, fine. You are setting your stop below today’s intraday low, which was 45.70, so maybe you set it at 45.60. I wouldn’t even set it below 45.00, 45.60 that’s it. So then what are you risking? You are risking this 6.3 percent that it has moved up. Even if you set it there you are risking like 7 percent. Or if you are just setting it slightly below today’s intraday low you are risking less than 5 percent. That is how you get on a stock like this that is running. Where you know you shouldn’t be buying it. You are chasing it you know you just shouldn’t be buying it here but by God you are going to do it anyway. At least now you have an escape hatch that you can always get to and you don’t have to worry about where to sell the stock when it breaks down.

That is kind of a similar thing to Roku ( NASDAQ:ROKU ); where once the deal is done, once the trade is over, it is over. This is a different kind of thing because it is so volatile, but if you were buying up here, and again, just a bad case of the ‘can’t help its’, the stock is moving lower and you are sitting here still hanging on to the stock after it has moved down 20 percent from this opening print, even more from this high, that is a real lonely place to be. So you have to treat these momentum stocks with respect and know that you can chase them. I wouldn’t but you can. Just make sure that you have got a tactic for getting out in case the stock does reverse on you.

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