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.


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9 comments:

Dave said...

Allan, how much influence does a higher short interest have on your decisions?

Allan said...

dave, none.

Anonymous said...

The Traditional 3 box reversal chart shows prelim. Bullish price objective of 7.5

cruiseguy said...

So Allan,

How do i know if I am buying on a dip? or if I should have sold to protect my profit? This is how my wins turn into losses...

Cruiseguy.

cruiseguy said...

So Allan...right now MWY is up to 4.04 and it is hesitating...where do I put my stop loss? I originally bought in at 3.09 with 1/4th of my position and then again at 3.77 3/4ths.

Cruise Guy...

Allan said...

CG: I hesitate to specify your exit, it depends on so many other factors that I am unaware of, you, your type of trading, your other stocks, your psychological profile, your cash flow, i.e. ability to take on other trades while holding MWY, and myriad other matters all of which go into the decision making process. But this may help: MWY could retrace $1.00 and still be in a bullish chart pattern. Way too much of a drawdown to sit through, so maybe stop 1/2 at around 3.80-3.90 and the other 1/2 around 3.65-3.70. Worse case you give back some but not all of your profits.

Cruiseguy said...

Fair enough....I really appreciate all of the time you spend with your blog!...

I will be adding a link from my blog to yours, @ www.cruisesource.us

BTW...I sold 100% at $3.94, I hold onto the profits since I have let other slip by.

Allan said...

Cg: You're welcome...you know I have pretty high confidence when i take a trade (read: post a trade), that it will pop anywhere from 10-30%. What I don't know is what will happen next. Some continue to triple digit gains. Others give that pop all back. That's why I say I will share these ideas in my blog, but I can't manage the trades after that. I just don't know. That's where rules come in, like not letting a gain turn into a loss and otherwise having stops or plans. Still, it's better to get the ideas and be stuck managing your own trades, then not to get the ideas at all.

Anonymous said...

"MWY could retrace $1.00 and still be in a bullish chart pattern."

I agree and since you recommended this stock I've had a buy order sitting at that price. :)