Robert Colby, one of the stellar contributors to TraderPlant.com, has an interesting column today. You should check it out because the content points to myriad opportunity in a market pushing uphill. The opening sentence is below.
The market is looking forward to GROWTH.
Colby’s opening sentence gets to the point factually and with no fanfare, but let me say it in another way – the market train is leaving the station. It appears the market WANTS to go higher, no matter the impediments thrown in the way.
On another note, JDS Uniphase (JDSU) is a symbol for the torrid technology sector. The stock has jumped 40% since early January, and 24% of that came yesterday. I know this because I owned the stock until this morning. The reason I don’t own it anymore is a reason I have discussed in this column before – getting your stop picked off.
This can be annoying and it can take profit from your pocket. My advice has always been, “It is part of the market, so get used to it and do the best you can to avoid it.” Well, I did what I could to avoid it, but the truth is that when a stock is moving as JDSU has been moving, the price action is so furious that anything can happen. The good news is that I am used to it, so, even though the market took me out of the trade, I left with a nice profit and a feeling that I did just fine.
I feel fine about the trade (even though it is up a bit more than my exit point) because the events around it did not just happen to me – I thought about and managed the trade as long as I was in it. I tracked the news about it. I tracked the volume. I watched the short ratio, and most importantly, I adjusted my stop as the price action became more furious. As I said, when the price action becomes furious, traders look to take profit, so, unless you are in no matter what, as a trader you should be thinking this way as well.
Two days ago, I began receiving market alerts about JDSU’s earnings report coming out, as well as its increasing volume. Insiders were buying. Money was moving. These alerts spoke to the fact that this long-suffering high-flier from the old days of the tech boom (late 90s) had turned the corner and it would report an unbelievable beat of the Street’s expectations. When I read several of these, I knew what would happen – the stock would jump, and it did. Now, when a stock leaps as JDSU did, you can expect that in the immediate term it will fall back. It is hard to know if it will go higher after the strong move, but it most certainly will fall back as traders take profit. In this was my decision. Sell immediately on the heels of the 24% jump, or widen my stop and risk profit. I chose the latter, and the stock did move higher and it did fall back, and I did get taken out, but my exit came at the high point of the 24% move (trailing stops make this possible). So, in the end, I could have sold immediately or did what I did. Either way, I came out pretty much the same. No lesson here. In my mind, I played it just right.
Trade in the day – Invest in your life
