In the December 23rd newsletter I referred to my previous articles on Covance relating to how it was a steady stair-stepper stock and has a strong seasonal track record going through the next few months. I suggested it would be a good time to add to an existing position, or take a new position. CVD opened that morning at 87.13
As you can see, over the four weeks since that article, CVD has broken above previous resistance and kept right on going.
Covance is due to announce earnings on Tuesday, February 4th, after the market closes. If you bought CVD on December 23rd, you are now up 10%. If you bought right after the focus on CVD in my November 15th newsletter, you are also up about 10%. If you bought CVD from my initial mention in the May 23rd newsletter, congratulations, you are up 27.4%.
CVD's recent rise seems to have taken a pause on Friday, and it is only 11 trading days until CVD announces earnings. You might be asking yourself if it would make sense to take profits right now.
Did anything change with CVD's fundamentals? No. Is CVD showing any technical setup that could be the prelude to a significant pullback? No. Has any news come out about Covance that should be a red flag? No. In fact, a Jefferies & Co. analyst just upgraded the stock from “Hold” to “Buy”. So the picture that originally got us into the stock has not changed. None of these factors support exiting the stock.
Now CVD has climbed 8.6% in just 9 trading days. The likelihood of big traders taking profits, as well as the potential for an earnings report on February 4th that won't be well-received, suggests this may be a good time to turn a bit conservative on CVD.
First, if you are a stock-only trader, then the proper thing to do is to implement a trailing-stop. I usually recommend 8%, so if CVD retreats 8% off its recent high of 97.48, you should sell the stock. You can always reenter if another good setup in the stock present itself.
Now I will stop here, but in today's newsletter, I cover how to increase the returns of this trade by 30% or more by covering several possible adjustments to this trade.
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, including the answer to the above question, type in www.markettamer.com/seasonal-forecaster
Copyright (C) 2014 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
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