Haven't had a mailbag question in some time so I was happy to see "Mailbag" in the subject of the email that arrived today! Here is the question:
Since I am out of town, I set a trailing stop on positions of 6%. Is that a reasonable %? What level do you prefer setting. I've read anywhere from 3% to 30%.
Answer: Ultimately with any stop you have to decide if you are willing to lose that percentage on the investment. I don't want to go in thinking negatively, but that is what we have to do. I personally don't set stops greater than 10%, but my preference is 6% - 8%.
Trailing stops are a different animal. I will set deeper stops on a trailing stop because the stop will travel upwards as I make profit. Using them on vacation is a good idea. They are a requirement if you get into a parabolic price trend. Parabolic patterns end terribly about 90% of the time in my experience, losing anywhere between 15% - 25% in a day or two. Of course a gap down will take you down with the rest, but at least having that stop will protect you from losing as much as everyone else.
Setting stops is personal based on your risk appetite. I do recommend that everyone set them on all investments you enter, a mental one if you are able to watch the market during the day and a hard stop in a bearishly biased market or riskier stock/ETF.
I had a wide variety of stock requests. Two were Gold Miners as well as the Gold Miners ETF (GDX). This group is on fire. I preferred DRD to NEM. NEM is a leader in this industry, but it hasn't seen good relative strength. I didn't present any of them because I think we all know that it is a great industry group right now.
UNG was requested, but I'm not going to cover it. I have a buy and hold position that is very small (and getting much smaller). I'm counting on a reversal eventually that will turn into something huge, but this one nor the strategy is for everyone. I hold Gold similarly. Fortunately that one has been a big winner on a much bigger position. I think entry here is okay, but the PMO has turned down this week. You'll get a better entry. The $NATGAS chart is depressing as it has another 25%+ it could fall to reach its all-time lows. I'd hold off adding or getting in right now.
The 3x Biotechnology ETF (LABU) was also requested. I presented IBB yesterday, so you know I like the group. Full disclosure: I own IBB. I prefer to stay away from 'juiced' ETFs, but if you have the risk appetite, it should work out. The problem is, if it doesn't work out, you'll lose 3x more than I will.
Don't forget to register for tomorrow's Diamond Mine trading room! The link is below. If you can't make it, but have a symbol request, email me.
Good Luck & Good Trading,
Today's "Diamonds in the Rough": GGAL, GPRE, PDSB and TELL.
Other requests: LABU
RECORDING LINK (4/7/2023):
Topic: DecisionPoint Diamond Mine (4/7/2023) LIVE Trading Room
REGISTRATION for 4/14/2023:
When: Apr 14, 2023 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (4/14/2023) LIVE Trading Room
Register in advance for this webinar HERE.
After registering, you will receive a confirmation email containing information about joining the webinar.
Here is the last recording (4/10):
Welcome to DecisionPoint Diamonds, wherein I highlight ten "Diamonds in the Rough" per week. These are selected from the results of my DecisionPoint Scans which search for stocks that could benefit from the trend and condition of the market. Remember, these are not recommendations to buy or sell, but are the most interesting of the stocks that surfaced in my scans. My objective is to save you the work of the initial, tedious culling process, but you need to apply your own analysis to see if these stocks pique your interest as well. There are no guaranteed winners here!
"Predefined Scans Triggered" are taken from StockCharts.com using the "Symbol Summary" option instead of a "SharpChart" on the workbench.
Stop levels are all rounded down.
Avadel Pharmaceuticals plc (AVDL)
EARNINGS: 05/08/2023 (BMO)
Avadel Pharmaceuticals Plc engages in the development and commercialization of pharmaceutical products. Its products include Bloxiverz, Vazculep, Nouress, and Akovaz. It focuses on the approval of FT218, a formulation of sodium oxybate designed to treat excessive daytime sleepiness and cataplexy in adults with narcolepsy. The company was founded in 1990 and is headquartered in Dublin, Ireland.
Predefined Scans Triggered: New 52-week Highs, Moved Above Upper Bollinger Band, Moved Above Upper Price Channel and P&F Double Top Breakout.
AVDL is up +0.88% in after hours trading. Price broke out today and has formed a bullish rounded bottom. The RSI is positive and the PMO just triggered a Crossover BUY Signal. The OBV is seeing great expansion on this recent rally. Stochastics are above 80. The industry group is very short-term performing with the market, but overall it has been an excellent performer. AVDL is outperforming the group and the SPY. I've set a 6.8% stop that is below the last filled black candlestick around $9.49.
The weekly chart suggests it hasn't quite overcome long-term resistance. The weekly indicators suggest it will. The weekly RSI has been positive all year and the PMO has turned up above its signal line. The SCTR is at the top of the "hot zone"* above 70. If it can reach that intra-week high from 2020, it could be quite lucrative.
*We call it the "hot zone" because it implies that the stock/ETF is in the top 30% of its "universe" (large-, mid-, small-caps and ETFs) as far as trend and condition, particularly in the intermediate and long terms.
Green Plains Inc (GPRE)
EARNINGS: 05/02/2023 (BMO)
Green Plains, Inc. engages in the production of fuel-grade ethanol and corn oil, the provision of grain handling, and storage commodity marketing and distribution services. It operates through the following segments: Ethanol Production, Agribusiness and Energy Services, and Partnership. The Ethanol Production segment produces ethanol, distillers' grain, and corn oil at ethanol plants in Indiana, Iowa, Minnesota, Nebraska, Tennessee, and Texas. The Agribusiness and Energy Services segment includes grain procurement and its commodity marketing business, which markets, sells, and distributes ethanol, distillers' grains, and corn oil produced at ethanol plants. The Partnership segment provides fuel storage and transportation services by owning, operating, developing, and acquiring ethanol and fuel storage tanks, terminals, transportation assets, and other related assets and businesses. The company was founded in June 2004 and is headquartered in Omaha, NE.
Predefined Scans Triggered: P&F Low Pole and Hanging Man.
GPRE is unchanged in after hours trading. We have a trading range stock which I usually am not interested in, but this one looks ready to test the top of the range. The reverse head and shoulders would put price at overhead resistance. It could breakout there as well given that very positive PMO on an oversold Crossover BUY Signal. The RSI is positive and not overbought. Stochastics are above 80. The stop is set well below the neckline of the pattern at 6.7% or $30.91.
The top of the intermediate-term trading range would take price up over 28%. The weekly RSI just moved above net neutral and the weekly PMO has reversed back up. It is really flat so its movement is less impressive, but that is a product of the trading range. The SCTR is now in the "hot zone".
PDS Biotechnology Corporation (PDSB)
EARNINGS: 05/10/2023 (BMO)
PDS Biotechnology Corp. engages in the development of clinical-stage immunotherapies to treat various early-stage and late-stage cancers, including head and neck cancer, prostate cancer, breast cancer, cervical cancer, anal cancer, and other cancers. Its products PDS0101, is an off the shelf immunotherapeutic that is administered by subcutaneous injection. The company was founded by Frank K. Bedu-Addo on March 15, 2019 and is headquartered in Princeton, NJ.
Predefined Scans Triggered: New CCI Buy Signals, Moved Above Upper Bollinger Band, Moved Above Upper Price Channel and Parabolic SAR Buy Signals.
PDSB is up +2.01% in after hours trading. This is probably my favorite today and is now on my radar. I would love this one on a pullback. There is a double-bottom that confirmed on today's strong breakout. It has already reached the minimum upside target, but I see it moving much higher. The RSI is rising strongly and not overbought at all. The PMO has executed a Crossover BUY Signal and Stochastics just pushed above 80. Relative strength for PDSB is increasing. The stop was hard to set the stop given the big 10%+ move today. I opted to set it somewhat deeply at 8.6% or $6.37.
Today's breakout has broken a long-term declining trend. The weekly RSI is about to move above 50 and the weekly PMO is beginning to turn back up. The SCTR is strong at 91.4%. If it can get to its 2023 top it would be an incredible 93% gain, I'd be good with half!
Tellurian Inc. (TELL)
EARNINGS: 05/03/2023 (BMO)
Tellurian, Inc. engages in the production of natural gas and investing in natural gas projects. It operates through the following segments: Upstream, Midstream, and Marketing and Trading. The Upstream segment produces, gathers, and delivers natural gas and acquires and develops natural gas assets. The Midstream segment includes development, construction, and operation of LNG terminals and pipelines. The Marketing and Trading segment involves the purchasing and selling of natural gases. The company was founded by Charif Souki and Martin Houston in 1957 and is headquartered in Houston, TX.
Predefined Scans Triggered: P&F Descending Triple Bottom Breakdown, Stocks in a New Uptrend (Aroon), Moved Above Upper Price Channel, Entered Ichimoku Cloud and P&F Double Bottom Breakout.
TELL is up +1.75% in after hours trading. Today we have a bullish engulfing candlestick that is coming off a bearish filled black candlestick. I look at that as very positive. The RSI is positive and the PMO just moved above the zero line. Stochastics are above 80 and the OBV is rising strongly so price is following volume. Relative strength for the group is improving based on the jump in Crude Oil. With Oil breaking out, I believe Energy positions will do well a bit longer. TELL appears to be a leader given its increasing relative strength against the group. The stop is set a bit tighter than I'd like, but getting it below support meant a 9%+ stop and I'm not comfortable with that. I've set it at 7.5% or $1.58. This reminds me that given this is low-priced, it will be volatile so make sure you are okay with that risk.
The weekly chart looks great because it is showing a lot of improvement. The weekly RSI is rising strongly. Price has broken out from a bullish falling wedge. The weekly PMO has turned back up and should give us a Crossover BUY Signal soon. The SCTR isn't in the "hot zone", but it is rising vertically. If it gets to that early 2022 low, it would be a 33%+ gain.
Don't forget, on Thursdays I look at reader-requested symbols, click HERE to send me an email. I read every email I receive and try to answer them all!
Current Market Outlook:
Market Environment: It is important to consider the odds for success by assessing the market tides. The following chart uses different methodologies for objectively showing the depth and trend of participation for intermediate- and long-term time frames.
- The Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA)
- The Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA)
Don't forget that as a "Diamonds" member, you have access to our GCI/SCI curated ChartList on DecisionPoint.com. You'll find it under "Members Only" links on the left side on the Blogs and Links Page.
Here is the current chart:
Full Disclosure: I am 26% long, 2% short.
I'm required to disclose if I currently own a stock I mention and/or may buy/short it within the next 72 hours.
"Technical Analysis is a windsock, not a crystal ball." - Carl Swenlin
(c) Copyright 2023 DecisionPoint.com
NOTE: The stocks reported herein are from mechanical trading model scans that are based upon moving average relationships, momentum and volume. DecisionPoint analysis is then applied to get five selections from the scans. The selections given should prompt readers to do a chart review using their own analysis process. This letter is not a call for a specific action to buy, sell or short any of the stocks provided. There are NO sure things or guaranteed returns on the daily selection of "Diamonds in the Rough."
Regarding BUY/SELL Signals: The signal status reported herein is based upon mechanical trading model signals and crossovers. They define the implied bias of the price index/stock based upon moving average relationships and momentum, but they do not necessarily call for a specific action. They are information flags that should prompt chart review. Further, they do not call for continuous buying or selling during the life of the signal. For example, a BUY signal will probably (but not necessarily) return the best results if action is taken soon after the signal is generated. Additional opportunities for buying may be found as price zigzags higher, but the trader must look for optimum entry points. Conversely, exit points to preserve gains (or minimize losses) may be evident before the model mechanically closes the signal.
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