The Importance of Trend Lines
Nice chart:
Nice earnings, and looking good in a bad tape.
Where would you want to enter this stock, ideally? When would you sell it?
Here’s the next few weeks:
Would you buy this pullback to support? Why or why not?
After you’ve thought about my questions…find out what stock I picked.
Surprised? Or feeling confident?
Using trend lines to time low risk entries is crucial. If you would have waited until the 50-day to add ($77), instead of chasing at $87, you would have fared much better despite being stopped out at around $75 (where I would have set my stop for a buy at $77).
That’s one way to limit risk––position your entries at a critical junction so you know more immediately if you are right or wrong.
Earlier this month I sold the majority of my [[hum]] at $80, and was stopped out of the rest at $76.75. Ignoring support and trend lines would have caused me a lot of pain and destroyed a significant part of the LT gains I made on this stock.
By being prudent, however, I was able to lock in a large gain.
from briefing.com:
Reuters reports that New York Attorney General Andrew Cuomo plans on Wednesday to announce the launch of an industrywide investigation into health-care insurers, his office said. Cuomo also plans to announce his intent to sue one of the largest U.S. health insurers, his office said. The target is publicly traded, and will be accused of deceptive practices, a person familiar with the situation said on Tuesday… Shares of large U.S. health insurers traded lower ahead of the news conference.
Another note from briefing.com:Â
Citigroup notes that Reuters reported today that health insurers will join that large club of organizations that NY Attorney General Cuomo plans to investigate. They note that health insurers are highly regulated, have reams of state & fed regs & laws to follow, and are constantly under the microscope for business practices. Therefore it is extremely rare to find a material breach among large health plans that have significant legal & compliance controls & procedures in place. The firm says to buy AET, CVH, HNT, HUM, UNH, WLP on weakness.
As a ’side’ benefit, once the trend is broken, there’s a good chance of a stock breaking the other way.
HUM illustrates this point perfectly as well…since breaking the uptrend (Feb 5th), it has dropped ~10%.
Another recent example is BWLD, which is up 5+ points (~20%) since breaking a downtrend on Jan 23rd.
February 13th, 2008 at 9:16:12 amexcellent points dpeez
February 13th, 2008 at 9:19:53 ampossible blow-off bottom today .. mongo vol
February 13th, 2008 at 9:42:09 amI tend to agree as I know the fundies of HUM and they are good. Stock should be at 80. HUm has always suffered from headline risk like this.
There’s a strong note reiterating buy down here
February 13th, 2008 at 10:01:16 amDanny, also, once HUM broke out, and then went back below the break out level, and then didn’t bounce back quickly, was a huge sell signal.
February 13th, 2008 at 12:31:19 pmyeah.
You talking ~83 or ~80?
That was why I sold at 80. very significant level there. I left about 20% of holdings for a last stand which failed, stopping me out at 76.70
it is important to point that out though. Important lines, important tells.
Better stop would have been 83, and not just because it was higher.
February 13th, 2008 at 1:23:34 pm