By Alex Salomon
Happy New Year to everyone!!
It’s that time of the year when energy is flowing, so let’s take a look at some charts that appeal to me and offer up some ideas. Not advice, just sharing some trading ideas!
The appeal is a break out above the multiple tops. When it happens (call it > $263) then the chart eventually opens up to $290. Just like pretty much everywhere else, the ideal entry was that “little” (!!!) January gap, but that’s history. My trade? Buy >263, take tier profits at 270, 280, 290. Eject back below 259.
Direxion Daily 20+ Yr Trsy Bear 3X Shrs (TMV)
3x ETF based on inverse treasuries, ie. a leveraged instrument to play rising US rates… $TMV goes up when the US longer maturity bonds rise in interest rates; 3x ETF are extremely volatile, with quick decay and present significant risks, so caution and risk management necessary.
TMV was a money-printing machine all last year (October until February) and then it all stopped – well, it printed tons of money if you shorted it!!
The major, significant break puts it back on my radar screen. I bought and sold it on Thursday & Friday January 3-4, 2013 but it is still on my radar/list.
The trade would be a volume break above $60: 50% position on the first day close above 60, 50% above 61; risk at 59. If the trade unfolds, I’ll sell 50% at 65 and 50% at 70, or trail stop $2.50 along the way.
Direxion Daily Retail Bull 3X Shares $RETL — the 3x ETF for SPDR S&P Retail (XRT)
RETL goes up if XRT goes up, but 3x ETF are extremely volatile, with quick decay and present significant risks, so caution and risk management necessary.
I started a $RETL position into the close on Friday January 4, 2013 at $105.65 and I think it is reasonable to base it off an XRT break out above $64, targeting $65 and $66.
The trade is to buy RETL and to sell 50% when XRT hits $65, and the other 50% when it hits $66.
BONUS FOR 2013: The Mo-Mo darling trading ideas!
Namely: EGHT, RAX, SSYS, DDD.
They all could gap down and crumble your portfolio… or they could double, again, in 2013. Since June 2012, I have been accumulating $DDD in my 401k every 3rd trading day of the month. It helps with the wild risks of gap downs.
For swing trading, it is high risk, high reward!
8×8 Inc. (EGHT)
Perfect momentum chart with a big advantage: no recent gap to fill, no magnets, not since mid-December. It’s overbought, overstochs, over-everything, but it is not quitting! Not yet…
I am thinking about buying it on the next kiss with its 10d SMA, about $0.20 lower, and then take profits at 7.75, 8.00 and keep a $0.40 trailing stop going on the last tier, for as long as possible.
Rackspace Hosting (RAX)
RAX squares me a bit more than $EGHT because it is over-over everything, but it’s a beauty for investors. I won’t touch it just yet, but for risk-lovers, any good news will make it touch $80, soon. Careful, though!!
Stratasys Inc. (SSYS)
Wild and extended and everything, just like RAX, but what a ride!
It could exhaust all the way to $90 (which would make a nice short, too). I am not buying it, not even close, but it is on my radar and will be all year. $70 entry would be a dream.
Just an idea or suggestion for investors looking to potentially accumulate these stocks — $EGHT, $RAX, $SSYS, $DDD — “as if it were for an investment plan”, so for investments over 6 months and more, I’d consider buying a 15% position every time we rest on 10d SMA.
Something like this: wait for pauses on 10d SMA, don’t trigger until the 5th day on that 10d touch.
Accumulate 6 times to remove emotions and swings, and then build a plan: sell if it violates your risk profile (for instance, for RAX, if it closes below $60, a long time support and break out), sell if you hear about irregularities, etc.; otherwise, ride it for as long as you can, maybe with a 10% trailing stop below your cost-averaged price.
This is just one of many ways of accumulating strong momentum stocks; it removes emotions. Buy on a rule and given price and identify a given floor to eject… while riding strong potential upside.
Take 3D Systems Corp (DDD) as an example – I have been buying every 3rd trading day of the month since June 2012.
I’ll eject and take profits at $50 (for now). But note that since I will continue to accumulate, that target may change over time. I will only add, now, on a 5th day post 10d SMA touch, no more than once a month.
Let’s revisit some of these trading ideas next year, on January 5, 2014!!
Positions in AMZN, DDD, and RETL at the time of publication.