«

»

Jun 09

Correction? What Correction? Here Are Five Stocks Setting Up For More Upside

We’ll be getting long CBOE Holdings ($CBOE), Marathon Petroleum ($MPC), SS&C Technologies ($SSNC), Qihoo 360 ($QIHU), and GNC Holdings ($GNC) at Monday’s open, increasing our equity longs from 25 to 30.

This is not a reflection of any view on the broader market, or a comment on any one sector over another, this is simply identifying names that are in long-term uptrends and have provided what I believe to be a good risk/reward entry point. Let’s go through them in turn and demonstrate what I mean.

CBOE Holdings ($CBOE)

There are a lot of charts that look similar to this in the sector. Why did I choose this one over others? Because the invalidation point afforded me a better risk/reward trade. I look for what it would take to invalidate the trend for the timeframe in which I’m operating. I look at previous pivot lows on a daily and weekly basis. I then look at how far that is away from the current price and likely entry price. That then determines risk and in turn, position size. Ideally I wouldn’t want to see $CBOE close below $39.93, but as an initial stop I can give it room to $39.31.

AlphaCapture

 

Marathon Petroleum ($MPC)

The parameters on this are a little wider, it’s further away from its recent highs than the others, but I really like the break of that descending trendline coinciding with reclaiming the ground above the 20 and 50-day. A break of that $73.47 low might be too generous a stop, but with an initial move higher that can very quickly be moved up to the band of support in the $79.93-$77.38 zone. Anything more than a temporary visit there would warn us it may be tracing out a more complex pattern.

AlphaCapture

 

SS&C Technologies ($SSNC)

This is another good example where the 50-day needn’t be the be-all and end-all, I can comfortably stomach a test of that and use a clean break of $29.98 as my stop. That high volume break a month ago is masking the fact that most of the volume since has been coming in on the up days.

AlphaCapture

 

Qihoo 360 ($QIHU)

This one is pretty simple, it’s a nice steady uptrend, I don’t have to treat the MA’s like a religion, it can break them without breaking the overall trend, I’d use a break of that $41.05-$40.22 band on a closing basis as my stop.

AlphaCapture

 

GNC Holdings ($GNC)

I’ve been stalking this one for weeks so in the back of my mind I’m conscious of the fact I could be guilty of pulling the trigger early but I like what it’s done and with 2 or 3 decent tests of the 50-day I wouldn’t expect it to come back for more. If it did it would be a very cheap exit for me which is what makes it all the more appealing and a great risk/reward setup. Use a clean break of that $43.59-$43.32 area on a closing basis as a stop.

AlphaCapture

 

 

 

2 comments

  1. Newtopips

    Hi Jon: I was little amazed that QIHU that you entered long had such a great potential on upside, but looking at the chart I didn’t understand the entry criteria for this stock. It bounced off from 20-day MA, but there was no significant volume or a new high when you entered. I missed and only looked it recently in your posts. Could you explain the entry criteria? You did mention that MA was the criteria, is it the only criteria that you used?

    I really enjoy your website and all posts. Thanks for your help.

    1. Jon Boorman

      Thank you for the compliment.

      There really wasn’t much to it, it was already in a strong uptrend and I knew I wanted to catch it at some point, the consolidation it underwent was the first of its type since the main move and the fact that it bounced at the first time of asking at the 20 put me on notice to enter, the subsequent follow through to close near the highs and the doji that followed just emphasized that it was likely to move higher again.

      I didn’t feel I needed to demand more of it to get me in, sometimes you need to demand more of the trend to get that proof, that confirmation, but I didn’t feel that was necessary here. Don’t overthink it though, you really shouldn’t sweat the entries, you could pretty much enter randomly and with good risk management still do well. Weeks and months later here we are looking back at that entry, how important was it? Answer: Not very. You could have entered the day before, the day after, maybe a week before or a week after. It’s the exits/stops/trail that have made it the winner it is, not the entry, the exit strategies keep you in a trend until they need activating when the trend is over, those are far more important.

Leave a Reply