FIVE reports earnings tomorrow after the close. The stock has not provided enough profit cushion to justify the risk of holding through earnings. Therefore, the stock should be sold before the earnings report. The stock can be re-purchased after earnings if it trades up, but note that stocks tend to be more volatile in the week or so after an earnings report.
FND was on our backup watch list and broke out of a cup with handle base today on above average volume. Buy half position now and other half once stock goes 2% above initial purchase. Use 10 week moving average as stop loss and do not let stock drop more than 7-8% below purchase price. We try to only buy stocks that are on our primary watch list, but if a stock on our backup watch list shows technical strength, then we may purchase stocks from the backup list.
One of the best ways to improve your trading results is by studying past winners. So, we studied some top stocks from last year and summarized their lessons learned here.
AMAT made a new all-time high today above the prior high of 60.89. This triggered an add-on buy point. Add 15% of total shares. This stock is acting nicely since our initial purchase and this is our second add-on buy. Use 7-8% below purchase price as stop loss for this add-on buy.
PAGS reported earnings after the market close yesterday and initially traded down today, but found support at the 10 day moving average and the prior short term high near $33. This qualifies today’s action as a shakeout day and somewhat of a pocket pivot. Therefore, today provides an add-on buying opportunity. Add 20% of total shares and use 7-8% below purchase price as stop loss for the add-on buy.
FIVE broke out of a cup with handle today so half a position can be purchased. Wait for the stock to go 2% above the initial purchase before buying the other half. Use the 10 week moving average as the stop loss (decisive close in big volume), but also do not let stock drop more than 7-8% below purchase price. Today’s breakout was on light volume, so caution is warranted. However, some stocks make significant gains after these types of breakouts (ALGN is a good example from last year).
VEEV was on our backup watch list and it brokeout on huge volume this morning, so we opened a position in the stock. We normally try to only purchase stocks from our watch list, but if one of our backup watch list candidates shows strong price action, then we may take a position and notify subscribers via this blog. VEEV is buyable from $68-71.50. Use 7-8% below purchase price as stop loss because both the 10 week and 40 week moving averages are too far from current price. You can either take a full position at once, or buy half and wait for the stock to go up 2% from the purchase price to buy the other half.
AMAT is flirting with an add-on buy point at 58.73 this week. The stock closed just barely above that price yesterday, but volume was average. Today, the stock rose above the buy point early, but reversed lower on light volume. If you added shares this week, then there is certainly no reason to sell those shares yet. If you did not add shares this week, then keep watching for the stock to close decisively above the buy point in above average volume. Use 7-8% below purchase price as stop loss since the 10 week moving average is a bit far away to use as the stop loss for those shares.
ROKU gapped down hard today after a disappointing earnings report yesterday. The stock clearly triggered a sell rule when it went more than 8% below our buy point. This is a tough reminder of the risk that is present when holding stocks through earnings reports. See our recent educational post about earnings reports for some tips on evaluating risk of holding stocks through earnings reports. In the case of ROKU, the stock is still very new and only had 1 prior earnings report, which increased the risk of holding the stock. However, the stock did provide 5-6% profit cushion, which is reasonable to hold at least part of your position. Luckily, we did not take a full position in the stock, so our loss was only on half a position. Note that the stock is finding support thus far around the base low near $39. We will keep this stock on the back burner and watch for it to re-take the 10 week moving average. The stock may end up forming a W pattern and present another buying opportunity, but we are avoiding for now.
HQY plunged today and triggered a sell rule when it went more than 8% below our buy point. This is a major change in character and a sign of weakness, so we will avoid this stock for the time being. Amazing how quickly this stock changed character because it looked very strong up until today.
Given the weakness that entered the market again this week, it is a good idea to reduce overall exposure and increase cash. The market appears to be struggling to maintain the current uptrend.
ROKU reports earnings after the market close tomorrow. The stock is up nicely today, so as long as the stock holds up tomorrow, we will hold through the earnings report. At least a 5% profit cushion is advisable if you want to hold the stock through the earnings report. The stock is trading 13% from a new high at $58.80. If it gaps up after earnings, then it is OK to buy the other half of your position, even it is does not make a new high. The stock is buyable up to $61.75.
HQY broke out of its base today on heavy volume. If you already own half a position, then you can now buy the other half. If you did not already own any shares, then buy half of your position now and wait for stock to go up another 2% before buying other half. Since 10 week moving average is too far away, use 7-8% below purchase price as stop loss.
PAGS continued to advance today and will likely close slightly extended (6%) from the buy point. If you missed the opportunity to buy at least half position today, then watch for stock to pullback between $30-31.50 for another opportunity to buy. If you bought either a half or full position today, then use 7-8% below purchase price as stop loss since stock has not yet formed 10 week moving average.
AMAT was up again today on above average volume. Since the stock recently re-took its 50 day moving average and is approaching the buy point, half a position can be purchased now. Wait for the stock to go through buy point before buying other half of position. Use 10 week moving average as stop loss, but also do not let stock go more than 7-8% below purchase price.
This month’s educational blog post discusses how to evaluate risk before an earnings report. Click here for this month’s educational newsletter.
ROKU has tested its 50 day moving average several times in recent weeks, and it finally appears that it will break through that resistance today. Volume thus far is well above average, exactly what you want to see in this type of move. This is an early buy point where you can purchase half of a position. Use the 50 day moving average as the stop loss, but also do not let the stock go more than 7-8% below your purchase price. The next buy point is a new high price at $58.80, but hopefully the stock forms a handle between now and then so that we can buy the other half of our position when it breaks above the handle area.