A few of days ago I wrote a post detailing the reasons for my entry on $WLDN, which is one of my favorite long positions. I wrote:
“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.”
This post is really just an update of how that trade is progressing (pretty well!) and to try and help any new traders out there on this type of chart play which can be counter-intuitive to our basic instinct when unfamiliar with this type of momentum chart play. I learned this strategy from a multimillionaire trader (possible the best in the world!!) and you can find out more information on how to learn from him if you….
Ok, so WLDN has continued up in price since my last article. It has 3 days of rest whilst maintaining RSI > 70 and then continued its grind up the 4 day ema. Who knows what price it will go to in the short term! I plan to sell half my position above $8 per share (whole round numbers tend to form resistance and support for these low cap stocks) and then let the rest of my shares ride medium or longer term. Please see the comparison of the 2 daily charts below to really appreciate the strategy here!
It is always wise to have an exit plan in these type of trades – my plan is to sell my position if the chart begins to weaken e.g if the RSI falls below 70 or if the stock price closes below the 4 day ema. The difficulty here is to be able to differentiate a normal pullback to the 4 day ema (blue line in the right hand chart is the 4 day ema), which often occurs and is a healthy demonstration of the stock ‘resting’ or if the decrease in price indicates potential weakness.
One mistake that people often make in trading these charts is to ‘bargain hunt’ this is where the stock has gone down in price and people think ‘ oh this is a bargain, i will buy it here!’ only to find that the price continues down. buying into this upward momentum and strength is often difficult for people because the tendency to think that the stock is ‘over bought’ or that it is just about to crash down from its new lofty heights. However, this is a CRUCIAL principle in trading that when realized can make you a ton of money. It revolutionized my trading!
Remember: BUY HIGH AND SELL HIGHER! Do NOT buy low and sell high as this popular mantra, chanted by the investment masses is intrinsically flawed!
Again, if you like this information or strategy you can learn more about it HERE
Happy Super Trading!