Sometimes making a second try on a stock can give you another chance to make it work. Even if you already had a successful trade. But CROX stock provides an example of a big problem with recent swing trading setups. The problem is volume is lackluster.
Hoping For More But Settling For Less
With the latest March 29 follow-through day in the stock market, Crocs was one of those stocks setting up but not quite actionable (1). It was still below both its 5- and 50-day moving average lines
However, the next day saw a strong move in CROX stock with a confirmation in the trading volume (2). That was enough for it to join SwingTrader.
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While we were hopeful that the new rally would be powerful enough to have staying power, we still stuck with our rules of locking in gains early on strength. For CROX stock, we took a third of the position off early in the next session with a 4% profit from our entry (3).
Locking in the partial profit was helpful as CROX stock ended up giving up the bulk of the gains that day but still finished up over 1%. But it wasn't able to make progress from there.
We ended up selling the remaining position in CROX stock after it fell below our entry (4). Whenever we see a sizable gain disappear and go negative, we cut our loss before things get worse. Because of the early profit taking and quick loss cutting, we still left the trade with a slight gain.
Another Chance For CROX Stock
Though the trade didn't work out as planned, CROX stock stayed on our radar. It got worse before it got better but still found support at its 50-day moving average line (5).
The next day, the strong price action was enough to entice us into another try for CROX stock early in the session (6). It was just slightly above our previous entry. But there's been a recurring problem with recent setups, bounces and breakouts. A lack of volume.
That was certainly the case with the second try on CROX stock. The trading volume at the end of the day was only half what it was on our first entry.
While you are never sure how volume will end up for the day, early indicators keep showing a lack of volume in most of the stocks we are seeing out there. Combined with the lack of trending sectors, it's continued to make us cautious.
Our profit taking rule came in play again with CROX stock and we took our first third off at nearly the same spot as before with a 4% gain (7).
The trade is extended now but still working for us which allows us to give it more room. But volume continues to fade, even on strong price moves (8).
It's a good reminder that this market isn't exhibiting the full-throated strength for aggressive buying.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on Twitter at @IBD_JNielsen.
