Today’s theme is Pullbacks – seems to be rather topical I’d say!
Gold and Silver pulled back big time yesterday but it shouldn’t have been a problem if you use our trendlines to manage your trade. The good news is that even some of our newer members wrote in to thank me for that exact thing – they’d taken their first profit target on SLV, raised their initial stop up to the rising trendline, and while they were taken out of the trade on the severe pullback, they were still comfortably in profit.
It is so important to follow my trading plan. If you don’t take that conservative first P1 profit target and adjust your initial stop you’ll be vulnerable to a nasty snapback like yesterday. If you follow my trading plan and take that conservative first P1, typically the worst that will happen is that you’ll keep the P1 and make nothing on the P2. That’s not a bad deal is it?
SLV
With SLV we had two potential entry points – just below $34 or just below $35. With the latter, the flag pole was just under $3, so by extending it by roughly a third we get to just below $36. SLV reversed from above $36, so plenty of skin for us to take that first profit target (P1), which should have been taken on Tuesday. From here, our initial stop is raised to breakeven, which here happens to converge with the rising trendline.
GLD
GLD really had a nasty , but if you trade by my rules you shouldn’t have been in on the most recent bull flag because it didn’t break last week’s resistance enough.
The high from last week was $173.77. As such we’d be looking to go long ABOVE $174, say around $174.12. The stock only reached $174.00 on Tuesday, so we shouldn’t have been in by my rules. Even if you were, your initial stop would be under Monday’s low of $171.58, which would have been a tiny loss in comparison with what happened as GLD closed at $164.29.
Now, let’s say you entered last week as the stock broke its early February high of $171.23. To that point the February range was around $4. Roughly one third of $4 = 1.33. On the day of its breakout, GLD reached $173.17 from its breakout of $171.23, comfortably over the $1.33 we’d take for our conservative first profit target P1.
This isn’t being wise after the event – you’ve written in to tell me this is what you did because they’re the rules!
AAPL
AAPL gapped up yesterday and is forming a doji bar as we speak … could this be sign for a pullback? The OVI is still very positive, so any pullback may be short-lived unless that changes. I typically don’t like to short AAPL. The flipside is that not many stocks have ever remained near $500bn market capitalization for long, which may be what may make the market a bit jittery with this. Otherwise it’s onward and upward until a major interruption to the trend.
LVS
Another one that you’ve traded which I thought I’d include today.
Entry just above $54. P1 around $55 and now trail the stop (currently around the initial entry point so your profits are ringfenced). Remember with stops after we reach P1, we adjust the initial stop so that we protect our profits – with LVS that means we raise the stop along the diagonal trendline, which currently sits around our initial entry point – which is perfect.
All the best
Guy
