Every once in a while the gods of trading look out for us and reward our perseverance, a little bone for all of those trades that don't turn out so well. When one of these opportunities takes place you should be prepared to take advantage of these rare gifts by pocketing profits when you can.
As an example, we issued a trade alert to our members this past week on HLX. We issued the alert because the stock had reported strong earnings and had pulled back to a key technical level and looked ripe for a bounce. And as you can see in the chart below the bounce was sharp.
The alert was sent out to members last Tuesday at an entry price of $9 with a price target of $10.20 and a stop loss of a close below $8.37. As you can see the target price was easily exceeded by the following day with the stock continuing to climb higher right into week's end, actually rising by 27% in two days.
That 27% climb in two days would be a spectacular rise even if it had taken a full year. But we all know that profits can disappear just as quickly as they appear and that's why it makes sense to have a strategy in place when these situations arise.
For example, in this case once the initial price target of $10.20 was hit, I issued a profit alert to members since our objective was met. That alone represented a 13% rise in one day; not too shabby. But sometimes if a stock has sudden momentum it's tempting to try and ride it higher. That comes with a risk of those profits evaporating quickly. So one idea would be to place a trailing stop that would continue to raise as the stock moved higher. This way you would be guaranteed to lock in a solid profit if the stock took a sudden turn.
I'm often asked what's an appropriate period of time to hold a stock when making a trade and my answer is always the same; I don't have a specific time frame. It doesn't matter to me if it takes one minute, one day, one month or one year to hit a price target as long as it continues to look solid on a chart. But once that price target is hit, it is important to lock those profits in or have plan B ready to go.
All of the trading candidates that are issued to members of EarningsBeats come from our exclusive "Candidate Tracker" which consists of companies that beat earnings expectations and have strong charts. In fact, I am going to conduct a webinar this Tuesday, December 6 at 7:30 pm eastern where I will discuss the concept of trading stocks that beat earnings expectations and have strong charts, including some examples of recent trades. And I will be joined by StockCharts.com's Senior Technical Analyst Tom Bowley, who will be discussing scanning for stocks that beat earnings expectations as well as an overview of the market. VERY timely as we near year end. If you want to join Tom and me for this Free event just click here to register. The session will also be recorded as well for those who are unable to attend the live event.
Locking in profits on a successful trade is still one of the hardest things to do when trading. But when you are lucky enough to hit a home run over a short period of time don't think twice; take the money and run!
At your service,
John Hopkins
EarningsBeats
