Let’s look at MyoKardia ( NASDAQ: MYOK ). Look at this pattern and then compare it to DraftKings ( NASDAQ: DKNG ). They are kind of like the same pattern, really, and so I would trade them the same way.
The stock was in a squeeze back here, it breaks out, it starts to run up. You have got to be long this stock and you just stay long the stock, if you are there is no reason to sell. You just hold it unless it breaches the 8-day moving average.
Now, if you are not long the stock, see the 8-day moving average, that’s support when a stock is really starting to move. When a stock really starts ripping, that’s when you can start relying on the 8-day moving average. I wouldn’t sell like, oh it hit the 8, but just use this as a frame of reference for whether this stock is still generally running higher.
If you want to buy the stock right now, yes, you are chasing. You look at this stock on the weekly chart, though, and you will see, well, maybe I am not necessarily chasing. I am in late but it looks to me like this is a pretty clean breakout. I could see this thing ultimately, I’m serious, I could see it running to $200.00. On a company like this, the fundamentals don’t really matter, focus on the charts.
You could even take a little bit of stock here, give it about 8 percent, you have to give it that much room. I would actually prefer, I would advise, that you wait for the stock to kind of give you a down day, where you can get it close enough to the 8 here, to where you don’t feel like you are risking to buy the top. But I get it, I know how people trade, I know you are going to do it anyway. You are just going to say, I am going to buy this stock, I’m in, I have got to get it. Fine, do that, just have a defined risk.
I say, use the 8 but another way you could do it is this way; the stock traded at 129.15 today so on Monday if I am buying this stock I will stay long the stock unless it trades below 129.15. Because if it trades below 129.15 then literally everyone who bought today on more than twice the average volume is a loser so I am wrong on that trade. So that is your definition for wrong, if the stock trades below today’s intraday low you are wrong, get out. You don’t have to ride it the rest of the way down, but that’s a way you can get in here.
What you may want to do is just take like half of a position that you might normally take and then wait for the stock to kind of come in, rest a little bit, make sure it doesn’t roll over. I don’t think it will, I think this stock has really good momentum. But try to get in on a little pullback that shows you support. That way you are kind of managing your risk and at the same time, I will say it, you are kind of chasing the stock. You are chasing momentum but I don’t think you are the dog chasing the bus. I think if you get on this it will run for a little bit.