Monday, July 21, 2008
MWY - What did we learn today?
Around forty minutes into trading today, I had accumulated about a half dozen frantic e-mails, "......is it too late to Buy?" I take great pride in not answering such questions, not directly anyway. But it does raise an important trading issue, i.e. if you've done your research and are ready to buy a stock, what happens if you are so right that it gaps up and doesn't look back?
I'll share with you two answers, one, what I did today and two, what I suggested be done by others.
I. Buy at the Open. Since I already established a position on Friday at $2.80, it was easy for me to buy more on the open, this time at $3.08. If you recall, my initial heads-up on MWY was pretty scantily researched. On Saturday I did a more complete examination of MWY and posted my results. It was clearly a Buy and especially if it popped above $3.00. By today's Open, that was a clear path MWY was taking so without hesitation, I finished establishing my position.
II. Buy on Dips. By the time the questions rolled in as to what to do about MWY running, it was way too late to tell people to buy at the open. Since even the strongest of runs include dips, that was the next best strategy, buy on the dips. As the chart below shows, there were two clear dips during today's 35% run. The first occured around 11:00 AM EDT and the second around 1:00pm.
All of this is much easier said then done, I know. But don't forget the targets for MWY are pretty high relative to stock price, 100% above Friday's close, or better. So buying the stock after it has risen 10-20% still retains most of the expected gain, even if the stock comes back on you. Looking back from $6.50, does it really matter all that much if you paid $3.00 or $3.30 for the stock?
III. New Targets. Here is a new chart, a monthly chart (with Triangle signals) on which I have placed a couple resistance lines, one at about $8.00 and the second at about $10.00. If MWY closes this week above $3.00, this range will become my new target.