Momentum can make a stock move quite far in a brief time period and produce spectacular cash making chances for us. You just recently received from me an article in which you learned to acknowledge some of the common patterns that stocks form when they are moving with a great deal of momentum. Often stocks will move well for no particular factor (as you learned in the previous short article) however other times it is a news heading that gets these stocks moving.
When a stock carries on news the trade is similar to a momentum trade that occurs for no obvious reason however there are some unique differences that you need to be familiar with. First, the timing is different on a news trade because momentum plays out a lot more quickly that normal. Second, news develops opportunities with other stocks in the very same sector that you may not have actually had otherwise.
Let’s begin with the timing of a news trade. We normally see a lot of movement on the first day of the trade but as more and more people hear the news there can be continued purchasing or selling pressure for the next day or so. What we get with a news trade is a terrific method to trade momentum and bank our earnings within a couple of days.
When you enter based on news, only do the trade if the technicals confirm the entry. Our entries will be very much like the entries you learnt more about in Part II of this article but we need to use tighter stops since this trade is so quick. Consider example Conoco Philips (COP) on the current oil price drop. The rate of oil had actually currently been weak and COP was in a drop. When the price of oil dropped as soon as again, the stock had actually simply filled the space from early January. COP gapped down giving us an entry. This was a terrific technical entry and the news just lured more traders to offer COP and drive it lower. The stock was down $1.98 the first day of the trade. When a stock moves well on news, I set my stops a little above a closing price. I do this due to the fact that, as I mentioned previously, news trades may last up to 3 days and may even end after simply one day. If the stock bounces the next day, what I desire to do is set my trade up to exit with profit.
As soon as again to secure the money from this trade, you will discover that on the second day COP continued to sell off another $2.71 and I tightened my stop down. The following day I was stopped out for about a $3 profit. This trade only took two days. Because these trades can be so brief lived, when you are trading on news I suggest that you utilize tight stops. And of course by tightening your stops instead of leaving the trade you will still have your trade if the stock continues to run.
When they revealed they had gotten approval to develop a brand-new resort near Macau, Las Vegas Sands (LVS) ended up being a news trade on January 10th. The news sent out the stock escalating and it closed up over $10 that day. By going through my scans, I normally discover stocks that are moving even before I hear the news. When LVS came up on my momentum scan (to find out more on my scans, join me in my Ultimate Scan free online workshop) the stock was rallying in a bullish candle light pattern with bullish indicators that confirmed this was the correct time to do the trade. The rate pattern on LVS was bullish and volume was extremely strong. This was likewise a stock that had traded in an uptrend for the majority of 2006 when it moved from about $38 to about $90. The retracement you see in December most likely rinsed a couple of traders however when the new resort was revealed the purchasers came flooding back in.
As the stock rallied above the $94 location we had a bullish entry. The price remained strong for 2 days and after that the stock formed a doji. If the stock pulled back from there, I tightened my stops to just below the opening price on the doji day to leave the trade. As you can see, tightening the stop instead of simply leaving the trade kept me in the trade for another day and another $4.85 rally. When again tightened my stops and left the trade the following day, I. This momentum trade ran $14 points from $94 to $108.
Among the benefits of news trades like this is that we can look to other stocks in the very same sector that may also benefit from the news. The day the rate of oil dropped COP wasn’t the only oil stock to trade. Naturally, that news impacted the whole oil sector and you might have location a bearish trade on a number of the oil stocks that weakened on the news. The exact same holds true for the news on LVS. That news developed a lot of excitement in the Casino & Gaming sector and we saw other video gaming stocks that moved well along with LVS. This is called a sector trade and is a simple method to trade stocks in the same sector that may not have actually run quite as quickly and therefore the alternatives might not be as inflated and expensive as the stock with the news.
When you see a news heading check out the stock with the news first and then you can start to
When a stock moves on news the trade is similar to a momentum trade that takes place for no apparent reason however there are some distinct distinctions that you need to be conscious of. What we get with a news trade is a great method to trade momentum and bank our earnings within a couple of days.
When you are trading on news I recommend that you use tight stops because these trades can be so brief lived. And of course by tightening your stops rather than exiting the trade you will still have your trade if the stock continues to run.