Quick review of the SEND trade. Making a sale does not mean I’ve gone cold on the company or the story, just following my plan and will likely reload again as I so often do when the next opportunity presents itself. I’ve been trying to dig a little deeper into each idea I share lately, so there’s a very good chance you’ll continue to see me trade in and out of the same names. One of the benefits of my strategy is being able to turn a swing trade into a position trade for a potential larger gain. Wanted to share this trade review on SEND because it really highlights that potential. The opportunity to see the price action and volume while holding the swing for a 10% target gain is a big advantage when thinking about aiming for a 20%+ profit target. The early entry within the base on the earnings report and pocket pivot also helped increase the profit potential here.
(Click chart to enlarge)
So why the sale on the 10ma break? I typically switch to a weekly chart once my cost basis is below the 50ma on the daily chart; but in the case of SEND, and with little technical history to go by, prior runs of similar magnitude tended to correct on the 10ma break (highlighted below). Price corrections tended to resolve below the 50ma before resuming the uptrend. In this case, if that same scenario should play out again, it would result in giving back most or all of my gains. While I remain bullish on the company longer term, I did not want to sit through a potential correction. Yet, I remain aware that I can grab another tranche at any time. The safer play for me on Friday was to take my profits at my 20%+ target, keep it on my radar and see what new info the price action here presents.
Chart courtesy of MarketSmith (Click to enlarge)