This was the bullish day we had been waiting for in Exelixis (EXEL). We finally broke past some key resistance levels and now the bulls have the upper hand to push our way towards the next resistance at $12.50 and onto the 52-week highs shortly thereafter. If the shorts start to cover at once, we will break past 52-week highs with relative ease, but I anticipate they will put up another fight and reject us at least once from breaking it. That is why I plan on peeling off more shares the closer to resistance we find ourselves while keeping our core position intact. This will allow for upside gain in case we do break through resistance, but also allow me to trade around a core position and lock in additional profits. If we lock in profits near resistance, find ourselves rejected, we can now load up again on a discount and profit on the next move up. With the bulls having the upper hand now, we should be able to breath a sigh of relief and be more confident we will continue to win this war. A new uptrend is in the process of forming and that is the battle line that we do not want to cross below now. If we do, then we may fall back towards support levels and have to regroup from there. Not something I’m even considering at the moment since I’m in the green. That would be a new situation that we’d have to analyze before considering jumping in again.
As of 3/15, according to nasdaq.com, EXEL has a short interest of 8.4 million. That is a significant amount of shorts that will need to cover if the bulls continue to press forward creating more pain. If we can convert more shorts to bulls during this move up, 52-week highs will easily be broken on the first attempt. The trick is to still stay disciplined even when confident and take some profits in case the shorts put up a good fight. If we can break resistance on good volume, we have the opportunity to aggressively add if we are quick. This is a type of insurance policy one can take, a small fee of losing out on a little profit to ensure we come away a winner. That is the main objective of my trading style. Home runs are great, but I don’t swing for the fences. I try hitting for average instead. Sometimes when you don’t swing for the fences, you can still blast it out of the park. We might have that opportunity here. Be confident , but stay disciplined as now we have profits to protect.
The chart has now changed a bit from when we first entered EXEL. Adjustments have been made now and adjusting stop losses (some would call it stop gains since its profitable) to ensure profitability is wise. You don’t have to put it on the entire position but one quarter or half wouldn’t necessarily be a bad move. Again, if you were wrong and it goes straight up, you can always buy back if done quickly. Keep in mind, we also have the upcoming ASCO conference in June. That will give the bulls additional ammo over the coming weeks. See the chart below for further commentary.
Thanks for all the emails today. I truly enjoy hearing others made money viewing some of my trade setups. We can’t win them all, but it’s nice to hear when we do get one right. As always, do your own homework to see if you agree. Good luck out there.
Mike
EXEL BIOTECH TRADING STRATEGY W/CHART AND DISCUSSION
At the time of publication, Kudrna was Long EXEL but positions may change at any time.
