Cup and Handle Breakouts

Now that I have set a foundation for what I do, how I trade, and my stock analysis I will be posting trading strategies to help new traders develop a style of their own with both entry, exit and risk.  One of my favorite chart patterns that I often recognize is the cup and handle breakout.

This pattern is often called a bullish continuation pattern that will lead to consolidation after a breakout.  In this pattern, you will notice two distinct zones implied in the name: Cup & Handle.  The cup will form as the stock creates an almost rounded bottom from a breakdown and rise back up. 

This example is from $JNUG in mid-December of 2016 leading into January.  You can see that there is a falloff in price and consolidation along the bottom, forming a round bottom on the 4-hour chart.  After several days of trading down in a consolidation zone, the price starts to climb higher up to the point where the price matches where it was prior to the breakdown.  That is the completion of the rounded bottom cup. 

This essentially will cause investors to start taking profits, sell off if they had been holding since before the drop off in price, or because they see this level as a resistance area that wasn’t held before.  This pullback that will follow the high of the cup forms the handle.  The handle represents the last consolidation before the continuation or breakout occurs, retracing back up to higher zones.  Ideally, with volume building at the consolidation area, investors will buy in, driving the prices up to breakout levels. 

Trading the cup and handle is tricky to do properly.  You want to put in buy orders so that you enter just above the upper trend / resistance line created by the ending of the handle.  You want to be sure that a breakout is occurring, not just a false breakout that will spike only to cause a massive sell off.  Upon entering, you want to watch your position closely, any pullback from your price to under the
support of the handle will see a decline is share price. 

 

In this chart, I have used the same exact chart as posted before only highlighting the points I was making.  You can see at $26.00 there is a consolidation zone prior to the drop forming the cup and handle.  As the price rises back up to its previous levels, there is a small pullback.  As you see a pullback from that level, you want to put your buy order in just above.  In this case I have circled where an ideal entry would be for both profit potential and risk mitigation.  I would put a purchase order in for $26.50.  This shows me that there is a clear break over the consolidation level as well as the upper zone of the final part of the cup and handle.

 If the stock continues to rise you are looking at a breakout.  If the price fails to trend up and you see a lengthy consolidation around the handle or a continual decline I share value, you will see there is no breakout occurring and no entry should be made.  If the price continues towards where I marked X, rather than breakout and run up to where you would have placed your order at, move on to the next stock. 

There is often “fake out breakouts” which occur when volume pours into the stock temporarily, driving the price up short term but leading to a sell off once the volume subsides.  This can cause you to buy in at your perfect target entry, but see a pullback in share price.  I have marked an X that symbolizes where an exit should be made if a fake breakout occurs.  The retrace back to support levels of the handle shows lack of sentiment and value by the market at that time, likely leading to a bigger sell off. 

This strategy works on any time frame.  This example is run off on the 4-hour chart, my favorite time frame to trade personally.  If you are a longer-term trader you can use the daily or weekly chart to discover the same pattern on different scales, as well as if you are a day trader or scalper using the 1 minute or 5-minute charts.  This strategy is scalable and very easy to recognize and follow.  I can answer more questions if there are any regarding this strategy and its application.

Trading Psychology

SOURCE: http://www.insightsquared.com/wp-content/uploads/bfi_thumb/why-people-buy-buyer-psychology-of-purchase-decisions-mx6ltneguhv45z0z7drrz7974r0mukjfbr11oxlh28.png

SOURCE: http://www.insightsquared.com/wp-content/uploads/bfi_thumb/why-people-buy-buyer-psychology-of-purchase-decisions-mx6ltneguhv45z0z7drrz7974r0mukjfbr11oxlh28.png

How many situations have you been in where you bought a stock that you truly believed in and knew that it was going to go up no matter what?  Now how many times have you done that, watched the stock hit a resistance level as you begin to panic, selling for a loss at a near low of day only to watch it rebound that afternoon?  Where I often see new traders falter is their trading psychology.  Too often a new trader will panic sell positions that they knew were good buys and would reach higher share prices than their buying price, but feel the short-term risk is too great.  This is what leads to 90% of retail traders to fail at investing their own accounts.  Letting emotion dictate when you buy a stock, when you sell a stock, and the stock you buy almost always leads to a poor outcome.  The best advice I have really is, keep your cool and stick to your game plan

No trader should enter a position on a trade without a real plan set in stone. That is a sure-fire way to guarantee failure.  Always have a strategy that fits your personality, risk preference, and is one that you will be able to follow for all your trades.  This will set up consistent patterns in your trading behavior, allowing you to analyze your efficiency in the strategy and adjust based on you results.  I trade almost purely off technical analysis, this allows me to follow indicators and pick which stocks currently fit my entry and strategy for both entry, exit, and risk tolerance.  While I prefer more risky investments and am willing to take a loss or average down, not many investors are capable of the stress.  I will lay out a few tips for you to follow to beat out pull backs or handle them with a better mentality than previously.

·        Never enter a trade without a set goal of entry, profit taking point, stop loss point, position size, and a clear set reason/indicator for which you are entering the trade
It is a fool’s choice to buy a stock for a trade (unless long term investing in an excellent product) that you believe in blindly.  I will follow technical indicators and let those dictate my trades, not “AMD to the MOON! $16 by the end of the week” because it is the current hype.

·        If you use a stop loss in your strategy, it is effective to set it tight, you do not want to expose yourself to higher risk than necessary. 
I personally rarely use a stop loss because I prefer volatile stocks that will likely give greater returns.  Having a stop loss a fair distance from your purchase price will cause panic to set in if there is a pullback and can lead to you being down 3-5% on your position taking a loss rather than down .5-1% if you keep your stops tight.

·        Take several entry points on a stock. 
Great traders do not buy and sell all their shares in single blocks.  They will often “position in” a stock, buying at a key entry zone they specify, watching the price action.  They will also do the same, selling a portion at their price target and letting the remaining shares run up with momentum to sell for greater profit.  If you purchase shares equaling 30% of your planned position size, it gives you more flexibility with averaging down or cutting losses.  Let’s say you have $1000 for a certain stock worth $10.00 and you decide you want to buy in so you purchase 30% of your position.  That leaves you with 30 shares and spending only $300.  If that stock then drops 10% after purchasing it and crashes through the stop losses you had planned, you are down only $30 rather than $100 if you had bought the full position.  It also leaves you $700 to average down your cost basis if it pulls back or allows you to keep buying into momentum up safely. 

·        Do not chase a stock. 
I have had followers see my purchases and notifications later in the day and try to jump into the momentum after a stock has already run 5%+.  They often get the short end of the stick as people begin taking profits and the share price starts to dip.  If a stock is running up big, it is usually best to sit the side lines as you are most likely too late.  The risk to reward ratio is not feasible to be worth putting your money into.

·        Take on risk that you know you can handle. 
Don’t purchase a leveraged ETF with 80% of your portfolio when you have no ability to day trade and get nervous easily, selling when you see bad price action.  The greater positions you take with the higher risk, the more likely you are to burn through an account.  Stay away from leveraged ETF’s or stocks that generally move 4%+ a day unless you have a clear set strategy you are implementing.

·        DIVERSIFY. 
While diversification might limit your potential profits, it also mitigates your potential losses.  I personally do not like to purchase any amount of a single stock that is more than 30% of my portfolio.  While I have in recent months, it is rare and usually when I am still bullish on technical and am averaging down.  A 10% loss on 30% of your portfolio is much better than 10% loss on 90% of your portfolio.

·        Lastly, Do not doubt your system. 
If your strategy is to purchase tech stocks based off Fibonacci Levels and keep $0.10 stop losses and hold for no longer than 2 hours, STICK TO THAT.  Do not try to trade 3x leveraged Oil ETF’s because you see them reach 52-week lows and that’s all you know. 

 

Every trader must know that they will have losing trades.  The key is learning to minimize your losses on your losing trades while allowing your winning trades to run past your price target, positioning out and taking profits as the price moves upwards.  Even if you have a winning trade only 50% of the time, if your winners make you 4% and your losers only cost .5%, then you will become successful in your strategy. 

My upcoming articles will lay out many different strategies and how to use them so that you can develop your own trading systems and not have to rely on my notifications or posts to find stocks to purchase.

Choosing Your Broker

In the new age of low commissions, low fees, and brokers being run by machines over man, choosing your which broker you use depends a lot on your goals.  Our goal at 2KHedgeFund is to bring investment control to the individual trader.  With that in mind I will run over a few broker options that deliver cheap commissions, user friendly platform, low or no minimum balance, and overall best experience.  While I won’t specifically rate each one as my use of them might differ from others, I will give the pros and the cons of each and let you decide which to go with.

Options House (By ETrade):

SOURCE : http://www.optionstrading.org/images/optionshouse-logo.png

This was the very first options account that I used and I recommend it.  Great customer service, recently bought out by E Trade, low commissions, no minimum balance, and a great platform.  For equity trades OH offers $4.95 flat commission fee and for options they charge the flat commissions with $0.50 per contract.  Their platform is excellent, offering a great options trading platform that can show you “what-if” scenarios that can occur depending on underlying price and days to expiration.  Their platform has a great alert system and conveniently browser based, so accessible on any computer at any time.  Some of their downfalls though include a low grade mobile platform.  Trading from your phone is a pain in the ass and will make you want to avoid it, but like I said they have the browser platform that works amazing.  For more sophisticated traders, OH does not offer ForEX trading, limited commission free ETFs, and no fee free mutual funds.  Investors that solely trade stock and options, more so options, OH is a great choice.  Sophisticated investors seeking other means of investing should look elsewhere.  NOTE: This is moving to E Trade though later this summer, so things might change with what they offer, prices, and platform.

 

RobinHood:

SOURCE: https://techcrunch.com/2014/09/23/robinhood-stock-app/

If you are brand new to investing, have never bought an equity before, or want to begin taking control of an individual investment account, Robinhood is a great choice.  Although this is accessible only on the phone app (there are ways to get the platform running on a computer but it takes work), it is still worth getting.  I will start with the downsides because they are prominent but often worth dealing with.  Lag.  At the open to each trading day there is often lag associated with sending trade requests out as the servers get a massive number requests.  It can cause Robinhood to crash (although rarely happens), but chances are it might take a few extra seconds for your order to go through which if trading 3x leveraged ETFs can be a costly arbitrage.  RH also is terrible on access to IPOs, but there is a way around that by connecting your account to stocktwits and trading through stocktwits commands.  This broker also has terrible customer service; just ask anyone who has tried to contact the company.  It takes hours to get through to a representative since the company is so small.   There are no options, forex, or short selling allowed on the RH platform currently, but they are supposedly working on adding these things in over time.  Along with terrible charting and an ugly android platform (the iPhone app is much more aesthetic), there are issues around accuracy of the extra information they provide such as the yield of dividend, P/E, market cap, and earnings.  For the down falls there are positives though.  $0 commission fees draw investors from every level of experience.  The ability to jump in and out of a stock hundreds of times a day, saving thousands of dollars a week draws the attention of day traders, while the no minimum and no commissions draw new investors to want to put $200 in an account and buy a few stocks and watch them to get an idea on how the market functions.  RH also allows you to listen in on earnings calls right from your phone through the app.  The app can also link directly to your stocktwits account, allowing you to share verified trades and show others your success.  RH also has a great tool for beginners, Pattern Day Trading Protection.  If your account has under $25,000 and you complete 4 or more day trades in a 5 day rolling span, your account will be prohibited from making any day trades for a 90 day time period.  Being a new trader it is often easy to forget how many day trades you have done in the week, so having the protection will prevent you from making the 4th day trade and putting you into the trade restriction.  This company also provides a monthly fee service called “Robinhood Gold”, which allows pre market and afterhours trading (9 AM to 6 PM), and margin access to extra capital for trading leverage.  I would recommend any new investor to try RobinHood first before other brokers if they have never traded equities before and are only interesting in investing or trading stocks. 

Here is my referral code if you are interested in signing up and receiving a free stock share -http://share.robinhood.com/collinb44 

 

TD Ameritrade:

SOURCE: https://investorjunkie.com/6233/td-ameritrade-review/

This is a very diverse broker service that offers everything you could want in investing.  Stocks, options, futures, commodities, mutual funds, forex, and a free research trading platforms are all offered at TD.  With $0 minimum account balance and a commission rate of $6.95 per trade and an additional $0.70 per contract, TD is considered a discount broker that provides professional services.  The greatest part of TD though and its most notorious platform is Think-Or-Swim.  I won’t go into details about it but it is one of the most used platforms for research by individual traders.  You can even open an account with no balance, let it sit with no money since there are no activity fees for TD, and use the TOS platform while trading on your RobinHood account.  They offer 4,000 no fee mutual funds, over 100 commission-free ETFs, free research data that is on a professional level, and 24/7 customer service by both phone and email.  If you have the money to cover commissions without it hurting your bank, and skill to trade using the TOS platform I would recommend TD.  If you have limited capital but want to use the TOS platform, open an account and utilize the no minimum balance to gain access to the free TOS platform.  If you want to trade options though a $2000 minimum balance is required for margin access.  TD has 2 other trading platforms that you can explore if you open an account, but most likely you will use TOS.  This is an ideal broker that covers all the bases at a low cost.

 

Tasty Works:

SOURCE:  https://www.reddit.com/r/options/comments/5ioqk5/has_anyone_received_and_email_from_tastyworks/

The new kid on the block brought to you by the makers of Think or Swim platform, Tasty Works is curtailed to fit the options trader.  Keeping ease of use in mind when creating their platform, maintaining a low commission rate, and providing vast option trading information, Tasty Works is another excellent choice.  Offering free education on option trading strategy via their YouTube channel Tasty Trade, this group has the best interest of its users in mind.  They have implemented a $0 commission closing cost to all trades and a fee structure of $1.00 per contract, $5.00 opening cost for unlimited shares, and $2.50 for futures contracts.  This is more competitive than OH and the other brokers on pricing, but not as attractive as RobinHood’s $0 commission.  Offering a browser, mobile, and desktop platform, you are able to trade anywhere at any time.  Fortunately this mobile platform is user friendly and aesthetic, allowing you to trade easily. 

Here is my referral link if you would like to begin trading with Tasty Works –

https://start.tastyworks.com#/login?referralCode=MFQHKQ86AE

 

Other Notable Brokers Worth Looking Into:

Interactive Brokers

Charles Schwab

Vanguard

Fidelity

Look for the "Sister Stock"

Is there a stock pick that you recently saw run up big time or jump suddenly and wish you had pulled the trigger and bought it before?  Now that you are stuck watching, you don’t want to buy in too late and get left holding a stock at the peak of its rise.  You can pick a “Sister Stock” that relates to the one that spiked, but reduce your risk of incurring a massive loss. 

When a company suddenly spikes and goes for a multiday (single day runs can work too but you want to be careful) run, you typically want to reduce risk and avoid buying in after the initial pop.  The better option instead is to see if there is any major news around the industry and trade a similar company.

For example, in November everyone and their mother heard about the Shipping Stock $DRYS.  Starting at a few dollars a share it ran over the next few days and to my surprise, rose to $16 over one day on a Friday, then the following week it ran up even more to around $50 on Monday.  Wanting to get in on the hype people started to buy in here even more, retail investors wanted to jump in and get rich quick putting it all on the line.  At first it looked hopeful.  That Tuesday the stock ran up even more running well up over $100 a share before noon.  Then it was halted.  The SEC investigated to see what was driving the price and people realized it was nothing more than hype buying and low float.  Once the halt was removed, down she went.   Despite having an occasionally recover spike, $DRYS fell the rest of the day and continue its fall back to reality the next few days as well.  Two days after its massive run up of over $100, it was back under $20 with no hope of recovery.  All those who bought at $80+ were left with a -75% in their portfolio.

So seeing Dry Ship soar up on no real news, investors looked to do the same in similar stocks.  Let’s look over at $SINO, a global shipping stock that I bought and sold during the Dry Ship hype.  Lagging behind, movement really didn’t begin at $SINO until a day after Dry Ship’s big run began.  $DRYS saw its initial spike on 11/10/2017 and continue its trend higher, $SINO didn’t start moving until 11/14/2017 and no real spike until 11/15/2017.  You can then see once people started to buy in bigger on DRYS, SINO followed suit with its move. 

The best part about this trade was you could see where to exit.  DRYS began to crash on 11/15, and investors began moving their funds over to recover hefty losses by pumping SINO.  After seeing what happened to DRYS, you knew that this would not last long.  Selling into the emotion and fear of others missing out, you remove the risk of being left holding a bag and also profit on the hope of investors flooding into a trending stock that spiked over 1000% in 2 days.

Other examples of this phenomina include:

AMD & NVDA

T & VZ (Look at 1/5/2017, both off big overnight leading into 1/6)

AKS & X

LC - Lend Me Your Shares

$LC – Lending Club, a peer to peer loan company where individual investors lend to borrows.  I love this company and investment tool.  Not only can you invest in this stock for gains that I see coming in the near future, but you can actually put your money up and diversify across borrowers to see returns of 6-10%.  Although I believe that this is a great tool to use in any investment strategy, my piece here is solely on the stock aspect. 

Ever since its IPO, $LC has not been doing too hot, but the past year it has been on a slow, bumpy, but steady increase in a trend back up.  I believe this stock fundamentally will do great moving forward.  Pulling business from CC debt consolidation as the main source of loan distribution will fight the power of big banks and help individuals control investments and their own finances (which we at 2KHedgeFund absolutely love).  While I notified this on my feed on 4/11 it was $5.54, currently sitting at $5.81 this thing can move.  It is volatile, it is moving up, and I think it will continue to do so.  The spike in September if you bought the top, you were rewarded in November during that massive spike up and able to sell for a profit.  If you bought the top in November and held you were rewarded in February during that spike.  I believe the next spike up will reach another new year high and provided returns no matter your entry.  You may have to hold for 3 months, but if you buy the top and are down 15% because of a pullback you better not sell. 

$6.20 shows a great level of support and resistance, showing consistent consolidation at that zone each time it reaches it.  Taking a look at the MACD you see no signs of converging together to show a change in momentum, the Bollinger band is breached but I see this continuing to run, the RSI shows over bought but again the momentum is there, it will not falter. 

Entry under $6.00 and selling over $6.20 is my ideal move on this stock.  At $6.20 I would sell or be hesitant of the position, expecting another hefty pullback.  The volatility of the run ups and pullbacks of this stock are big, so you must be ready to hold or average down.  My personal strategy is buy in 15% position or 10% position and buy on a big dip if I really think the stock will move, if not I sell my partial position.  I believe this will run up to $6.22 and then over $6.50 within the next month.  The momentum behind this stock, the channel up, and the basis behind the company show that it is bound for success.


A breach over $6.20 will give way to a run up to $6.80.

GDXJ or God Damn...I lost the clever title along with my money

Not exactly sure how to approach this.  It shows over bought, but the Trump agenda to reform taxes may just wipe out hope for gold and miners.  There is no current support or resistance at the $32.00 zone, so if we have hopes of getting a few days of sitting near old support, this has to go to $33.25 tomorrow. 

Technically, this thing is over sold to all hell.  That matters little to the junior miners though.  The downtrend could keep continuing.  Like I said before, if the stock doesn’t go up tomorrow to over $33, this lovely little portfolio destroyer is making its way under $30.00 to $28.00.  What does that mean for most people? 

$JDST will go up to $25+

$JNUG will go under $3.50

 

Right now, it is hard to tell so I would hold off entry.  I thought JNUG would be a good buy because GDXJ started off on the $33 support, but it broke.  That consequently gave way to the 15% dip which recovered partially.  I would find the entry in the next 2 days.  I do see the down trend continuing though with GDXJ falling to about $28.00, leaving $JNUG rotting while $JDST reaps the rewards.  All signs are point to an oversold bounce that should occur if this were any other stock, but this ETF shows no sign of market cooperation.

AKS - Stronger than Steel

Trump’s America was supposed to be the champion of the steel industry.  Taking a look at November just prior to the election you see the steel market start to react to an actual possible trump presidency.  Despite whatever political beliefs you have, you must recognize the great wealth Trump will bring into the infrastructure and steel industry in the USA.  Having spiked initially and trending down since early December, AKS seems to be fighting to find a bottom.  That might not be here yet however.  Looking at this last day, there has been fundamentally one big concern.  Trump’s follow through with the building of the wall and his ability to deliver on tax reform early in his presidency.  With massive doubt surrounding his wall claims and heavy scrutiny, the steel industry appears to be faltering.  Materials today in general are getting beat harder than a red headed step child.

If you have bought in under 7 fear not, even if you have bought under 7.50 fear not.  This stock will not be held down.  Let’s look at the past 9 months.  There are three support/resistance zones that I see formed.  Currently at the $6.00-6.15 zone, way down at $4.68, and slightly under $8.00.  Having been trending down I see this going back to touch the $6.00 mark again in the next 2 days, but come Monday I expect a rebound.  If tomorrow closes red and Friday closes green in a doji or hammer, this will fly.  Heading down to hit the $6 mark, a double bottom will be formed on the daily chart showing this is ready to start getting more buying pressure to drive price up.  While I would hold off on buying if you aren’t in yet simply because I think this will touch $6, I wouldn’t sell yet.  The RSI is not weak enough to indicate a strong enough buy, the MACD is not showing much signs of real movement, and the stock needs to drop more to reach the support zone of 6 and that lower Bollinger band.

If you see the $6, buy.  This is not a $5.00 stock, this is a $9.00 infrastructure play that will hold up well past the Trump reign.  Although I should have sold the peak today instead of holding, I will continue to hold.  I refuse to sell my position under $8.00.  I firmly believe that this will rise.  The past few large gap downs, it took a few days before the stock spike back up.  If you buy at $6.00 or lower, sell as soon as you see the 4-6% gains.  You can see in the 3 month down trend this has been on no spikes have held more than a day or two.

 

If you want to be short term, $6.00 is a good entry for a swing up to $7.00 or $7.50.

 

If you want a long-term hold, $AKS is also a perfect candidate to touch the $10.00 mark by the years end again.  The entry for a long position can be much looser and any position entered under $7.75 is a great position to be in.

My Swing Pick of The Week

My swing trade pick of the week right now is EBAY.  I was surprised to see this come up on my scanner.  With amazon and other online retailers, you often overlook this company and ticker especially.  Anyways let’s get down to it. 

Fundamentally this is a great company still.  Deutshce Bank, Benchmark Co, Royal bank of Canada, Cantor Fitzgerald, and many others still reiterate this stock as a buy and outperform ticker.  Even with its recent downgrade…it was downgraded to buy for long term.  This brought the shares down, but it won’t stay that way.  EBAY recently beat earnings, but has dipped on that downgrade by one group.  This stock has been on a constant uptrend over the past 5 years and I do not see it slowing down.

Let’s get to the technicals now.  RSI showing extremely overbought on the daily, under 10.  MACD shows no sign of converging yet, but I suspect it will start to turn over in the next day or two and I like to get into my stocks before they turn over on that indicator.  It has crossed the lower Bollinger band and has formed a candle that is almost a doji and almost an inverted hammer…but not quite either of those.  Although those indicators alerted me to this, I picked it because of that strong ass support and resistance line at 32.  This stock crosses in the past 6 months has sat around it bouncing around from $31.25 to $33.00 several times.  This is support line has held not once or twice, but multiple times.  This is the key indicator that signals the buy.  I would probably look at a good open on Tuesday, a dip in the late morning, and then rally the rest of the week. 

Enter at $32.00 zone and exit 4-5% around $33.00.  This stock will swing up and reach it.  Today the stock opened at 31.25, went up to 32.50 and just under 32 to 31.89.  The range is there for you to either scalp or swing trade.  It will be hard to time a bottom for this pick as the range is pretty large, but any entrance near 32 will be ideal and hold for a $.50 swing or more.

Trading off Support with Sunrun inc. (RUN)

As many of you know based off my StockTwits feed, $RUN (SunRun) has been a favorite of mine for short term swing trading.  I have been in and out of this stock for the past few weeks with great success.  Back in November I first got in this stock at a support level formed March of 2016, 4.85 and traded it up to 5.15.  I recently saw this again on my scanners two weeks ago in early March of 2017.  It was dropping to 5 again and I could see it wanting to go back to the support level.  Not wanting to miss an opportunity, I began a position at 5.05 and two days later it drops to the bottom I had found months ago of 4.85.

Having bought only a 10% position of the 20% max of my portfolio I allow to allocate to each holding I added another 10% to bring my average down to 4.96.  RUN continually shows support at about $5, dropping in a 3% range of it (my ideal swing trade range).  What I looked for, constant support that held around $5.00 over the past year, never crashing under for more than a few days at a time which only opens up a better buy opportunity. 

Sitting in my low average I was planning on waiting for a few weeks before selling, but a day later the price went up to $5.15, a nice 3% swing trade that I could get in and out of.  Knowing that the breakout from the support zone at $5 hasn’t occurred, I could buy back in at $4.99 again.  This time I held until today, selling at $5.38. 

My plan was to watch, it crosses under the lower Bollinger band for a few days in a row and I bought initially at my arrow, seeing the RSI sitting at extremely oversold and the MACD signal getting ready to turn over in a bullish manner, I initiated my buy.  I sold after the initial spike, and bought back in on the MACD cross.  The true bullish signal that showed me this would run and I should hold for longer than my usual 3%. 

First Off...Who Am I and What Are My Strategies?

I would like to introduce myself as one of the starting members of this website.  As many of you know I go by 2kHedgeFundCollin on StockTwits, my name just happens to be Collin.  I am a molecular biologist currently working in the biotech field and my trading approach is short term swing trading based off Technical Analysis with a small influence of fundamentals.  I am also an avid rugby player in the North-East USA for mens clubs, but relocating to SoCal this summer.  Although I enjoy swing trade, my interests also lie within DRiP investing and the goal of early retirement.   

 I will trade any and all sectors if the chart looks good.  Rumors and news matter little to my decisions.  I see stock charts as patterns, always repeating and almost always predictable to a degree.  A stock that has a multiyear support level at say, 50 dollars, will most likely continue to have that support level.  I will start a small position just before that support level is reached..  This allows me to get into the stock before the action starts pouring in, and at a level at which if the support breaks I can exit with minimal losses.  If the support holds I will add to my position and build a holding, waiting for a 3-5% gain on my position. 

This leads me to my next rules.  Cut losses, let winners run.  If I buy into a support zone and that zone breaks, cut it.  Even with a small 5-10% position of your portfolio, letting the price drop a massive percent so you can average down is a lost cause.  Holding a bag would be fine for long term investing, not swing trading.  You want to cut that 5% position at a 2-3% loss, keeping your total portfolio exposure to under 1%.  On the other hand, you want to let your winners run.  If your pick bounces off the support zone and rebounds to higher levels, you want to keep the momentum going.  Don’t fully exit until you see weakness. 

My strategy is to start to exit the position at 3-5% profit, selling only a portion of the shares and see if the stock continues up.  This allows you to maximize your gains, but if the stock were to suddenly turn you have locked in some of the profits.  Doing this, even if you end up selling the bulk at cost, you secure a profit to your portfolio.

I look for stocks that have oversold RSI under 30, have a minimum daily volume of 300,000 shares, and are close to or crossing over the lower Bollinger band.  Once these measures are put onto my scanner, I look through the charts.  I try to find picks that have finished the day on a large hammer candlestick, morning star, three white soldiers, ascending triangles, and raising wedges.  The overall pattern shows whether or not the momentum is going a certain way, and last daily candle marks the entry points.  This knowledge comes down to studying charts and patterns,  where you can recognize a beautiful chart that willpresent a perfect swing trade opportunity.