This week has been a great week for stock trading as we have seen all time new highs on the Dow Jones index and many small cap plays have been bouncing back up hard!
My new long positions this week have me very excited! First up is my new position in Willdan Group (WLDN). My position in this stock is based purely on the awesome chart (See the chart below).
WLDN’s chart has everything that I look for in a chart. Steadily increasing volume on daily chart, Strong RSI (RSI > 70), making all time highs with no close overhead resistance. I am in at $6.5 and my target price is around $8 per share. Additionally RSI is greater than 70 on the daily, weekly AND monthly charts! This demonstrates some serious strength in the charts! My stop loss is set to the 4ema region and I am optimistic that this chart will slowly grind higher over the coming days, weeks and months.
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This style of momentum trading is extremely profitable however initially it often feels counterintuitive. However in my opinion this is the best style of trading to make money from – it is fantastic because it is a swing trading strategy so you do not need to be glued to your computer screen 24/7. Most people feel uneasy buying a stock when it breaks new highs because we are so conditioned to think ‘buy low and sell high’ when in reality stocks that are making new highs break new highs! This simple concept combined with permanently changing the way that I think about stocks that have already moved dramatically upwards in price has revolutionized my stock trading strategy.
There are many great books out there that explains this strategy in great detail with many examples – the two that I use and highly recommend are:
This second book is by William J O’Neil and it is especially valuable – there is over 100 charts showing real life examples of many chart patterns!
Both these books are classics and are a must read if you are aspiring to be a momentum stock trader!