A reminder of the good ol’ days as this week was arguably the most fun and profitable week many bulls have had for many months, if not the entire year. For this week alone, the market acted sane and healthy once again. This was a great treat for the upcoming Holidays, many more smiles on faces and much more optimism in a fearful and negative world.
Per my StockTalks this week and recent articles, I became comfortable with the market on Tuesday and aggressively traded three positions which you can review from the previous links. As most of you know my trading style, I am patient and wait until the action turns bullish rather than trying to call a turn. This allows me to see confirmation before initiating trades, making them far less risky, but opponents will claim I miss the bottom therefore their gambling strategy on calling turns is better. You can be your own judge on which strategy is ideal for your hard-earned capital.
On Tuesday, I purchased shares in Newpark Resources (NR) at $8.27, Healthstream (HSTM) at $15.99, and Conns (CONN) at $10.60. I traded core positions in those three and from my initial purchase prices, the following percentages could have been gained within four days. (NR) appreciated 14% to $9.44, (HSTM) appreciated about 8% to $17.22 and (CONN) appreciated about 16% to a new 52-week high of $12.29. I also rode a speculative trade in Vical (VICL) from the previous week, my only real long position though smaller than usual, as it was acting bullish during the recent turmoil. Per Stocktalks, the trade was initiated at $3.63 and appreciated 31% to $4.75.
Obviously, this is a great week, but not a typical week. Every trade this week was closed in the green, that is not usual of even the most experienced of traders. The idea is if you can be right just 50% of the time and cut your losers fast while letting your winners run, you will be profitable. Don’t worry if you are wrong in a trade, you will be wrong often if you have a long career here. Just make sure you don’t rack up big losses by being wrong, that’s the secret.
I initiated a small short trade via long ProShares UltraShort S&P500 (SDS) on Friday morning’s open at $19.56 with the idea we will move near Thursday’s S&P 500 (SPX) close price at some point. I’ve continued to use ProShares UltraShort 20+ Year Treasury (TBT) as my shadow chart and in the premarket, TBT was not joining the rally giving me reason to believe we will get a fade at some point in time today. As of typing this, the trade is in the green at $19.81, which is minimal for a weekly trade but great for a day trade. I’m looking for a target of $19.90-20 today, but will adjust stops higher to ensure I don’t lose any money now that I am in the green.
I also initiated a new trade around lunch-time. You can view what that trade by reading my StockTalks.
I’m expecting more profit taking this afternoon and with the EU Summit late next week, I expect some cautious bulls may give way to a mid to late-week pullback. It is too early to tell though and I don’t predict, I simply react aggressively and fast when the path is clear. I always use stop-losses to protect, this is especially important when I am very aggressive with large purchases. Keep that in mind if you follow a similar trading style.
As always, do your own homework to see if you agree. Good luck out there.
Mike
At the time of publication, Kudrna was long NR, VICL, and SDS but positions may change at any time.
