Stock Watchlist 5/14 - DPZ NFLX CSCO IMUX CAN EA + Measuring Range Potential: Example using CODX.
Yo, where's CODX, why isn't the chart on my watchlist you ask? Because the breakout already happened. You should be locking in gains on the way up. I did sell most and held small size that had already turned into big size. Unbelievable run from the 16 b/o Monday. A prime example of what happens when shorts try to hit size above a breakout point hoping it falls back. If enough longs support it above the b/o point it will eventually speed up as shorts are forced to cover and reddit/twitter/chat room chasers get FOMO.
Focus on entry points! The key is to have small loss, small loss, then big win! The big winners will make up for the small losers so don't get discouraged. Focus on finding new entries on breakout potential stocks. Buying stocks stuck in .25 ranges because they had 'good' news 'hoping' they run isn't a strategy. I may seem like I'm entering late to you. But that's the art of trading. It's looking at the big picture chart and seeing the potential based on the previous action. Keep reading, here's the best part:
Former runners can run again if the didn't dilute the float heavily. The ranged bound breakouts of low float/heavily shorted stocks usually go higher than expected. CODX is no exception. I planned for this and bought calls $9 away based on range potential. You want range measurements? Look at recent lows compared to the b/o point. For CODX the recent lows were about 7ish while the resistance was around 16. Thus it had 9 points to the upside measured potential. Thus I bought calls up to $25 after it was building above 16 on Monday. I sold on the way up with the intent of holding on to the highest strike in case it does something stupid. 1800% later it can't be on the watchlist. If you're buying up here, ask yourself if you are the reddit/twitter/chat room user FOMO chasing? STUDY. Create a plan. Don't trade just to be in a trade. Are you a trader or gambler?
Add range measurement to your trading playbook tonight! The bigger the recent range, the bigger the potential breakout.
But Blaine, how do I know if the float has increased? Has volume increased but the range tightened? Good consolidation will have lower volume while it tightens up before a breakout higher on increased volume. Think TLRY 2018 vs. 2020. Volume has increased as ranges tighten, thus breakouts don't run 10-50 points anymore like they did when it first IPO'd.
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Okay, so what's next?
DPZ - daily chart finally trying to b/o over 380ish. They've been crushing delivery. I bought some 6/19 $420 calls today. We'll see if it gets going at least towards $400 in the next few days to lock some in with the intent to let some ride. Based on what I just discussed above, what is the potential target range? Hint: It's higher than most people think, but it could also take 3 months to get there. In the meantime, I'll trade around the $420 calls with the intent of rolling gains into higher further out calls if the breakout sticks. Of course, there is no guarantee it goes, so we use the trend as our friend for the risk guide. Remember, small losses and big winners.
NFLX - So damn close to next leg up. The recent range dipped to $400, so if we get the breakout over $445/450 we could see a relatively quick move towards 480-500 range in my opinion. Long-term could go higher than it if we see a breakout consolidate higher like it's doing right now. This is where timeframes come into play that I've discussed in other blog posts.
EA - Games have been heavy hitters during the stay-at-home economy. I'm watching for a breakout over 120 for a move into 130-150 range in the coming weeks.
CSCO - Up after hours off earnings. Watching to see if can breakout over 44 and 45 in the coming days for a run towards 49-50. If it gets there, we'll reevaluate.
IMUX - watching intra-day dips as it'll gap up off 'positive' news. Know the news, trade the action. The 5-minute chart will matter the most as we trade, but knowing daily levels helps; such as the 15 spot which seems to get sellers lined up. Last year, every time it popped over 15 it came right back down. Know this. It's not a chase and hold. Look for a curl off the dip and sell rips.
Wainwright threw a $45 target on it Monday. H.C. is notorious for throwing out astronomically high price targets just before they help the company raise money at a much lower price. My guess is they may do just that and use the 'positive' news as a way to commence an offering. Thus day-trading is ideal until we've scalped enough to pay for a swing trade. Meaning ideally riding house money on a swing trade in case they do an offering and it flops on us doesn't hurt as much. Know what you're trading. Don't just chase because of 'good' news. But it can run hard, so it must be on watch. Don't hate the player, hate the game.
IMUX edit: After checking, Roth already did a secondary back in April. Either way, I'm skeptical that they won't try again if the stock runs enough.
CAN - ideally breakout over 6 for next leg up. Target towards 8-9 range. IPO pricing was at 9. Low floater.
SGLB - Super low float after a reverse split in February. Experienced traders only here. If continues thru $3 and an algo joins in, this could run hard. Think CREX/RVP.
Happy Trading!