Here’s how we traded Clovis Pharma (CLVS) this morning. (February 27, 2019)


I want to look at Clovis Oncology ( NASDAQ: CLVS ) here; you can see why. There was a pretty tight squeeze here going into this morning. This was a stock that I featured in our Strategy Session last night; I set a price alert at 26.85. Yesterday’s high was 26.72 and then the stock traded up a little bit after hours.

I wanted to set it just a little bit above yesterday’s intraday high because the idea is if the stock is coming out of a squeeze obviously it is going to have to eclipse yesterday’s high. I want to set it more than a penny or two above that because there are a lot of times lately where you will get a breakout and then it turns out to be a fakeout, there is just selling into this.

We got a beautiful setup here; I prefer these things to be in uptrends, higher lows, higher highs and then forming a base at least above the 50-day moving average that is above the 200-day moving average. We don’t have that here. It is in a pretty nice uptrend the last few months. The 200-day moving average is what looms overhead.

The idea on this type of thing is, let’s say I am buying this stock here, 26.85 or whatever, I am going to buy it here. This would be a pretty fast trade because the stock is coiled to just absolutely sprint higher. So we are up here buying at 26.85. Where would I expect the stock to hit the 200-day moving average? Well, probably about 15 percent higher than our entry point, to me, that would be a pretty good trade.

I am just showing you this setup and this execution; you buy it a little bit above the prior day’s high. And then at this point, frankly, the way the stock traded today, at twice-average volume, I am looking for a breakout above the 200-day moving average. It is not a prediction and it is absolutely not a certainty, the stock is up 13 percent today.

What I would suggest doing is, if you are long the stock, if you are a member and you took this trade this morning then keep a trailing stop on it, use like a 15-minute chart or something like that. Once the stock gets going tomorrow, if it starts to move up again, then just hang on to it. But if it starts to rollover, move lower, if it starts to move a little bit below 29.00, then why don’t you go ahead an take a little bit of profits off the table. You don’t want to ride this thing all the way down.

Remember there are three phases in a volatility squeeze, the way I trade them. Phase 1 is the breakout. Phase 2 is the pullback. And then Phase 3, hopefully, is the continuation. Well, sometimes we don’t get a Phase 3 we just get the breakout and then Phase 2 turns out to be this. And so you want to guard against that by keeping a tight stop on part of your position, at least part of your position, to make sure you get rewarded for taking this risk.

Anyway, that is how we trade Clovis ( NASDAQ: CLVS ). That’s how we trade volatility squeezes.

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