The best holding and selling rules start with buying a stock right in the first place. Here's a swing trading example with FAS stock as the financial stocks rebounded.
The Return Of Financial Stocks
Many stocks saw a sharp rise from their October lows followed by uncertain action heading into the end of 2022. But 2023 offered new hope for a return to a bullish market.
The Direxion Financial Bull 3X ETF represents movements in financial stocks but adds three times the leverage. ETFs generally have smaller moves due to their diversification. The leveraged FAS stock amplifies the move to act more like an individual stock.
As FAS stock recovered above its 50- and 200-day moving average lines (1), we looked for an opportunity to get involved with the trade without buying extended. A pullback in FAS stock from the Jan. 13 near-term high (2) to the Jan. 19 gap down to a near-term low (3) provided that chance.
Waiting For The Entry On FAS Stock
FAS stock got support at its 200-day line on the pullback then retook its 50-day moving average line the next day (4). But it still had just filled in the gap down from the prior day.
The next day showed promise as FAS stock retook its 10-day moving average (5). But it seemed to find resistance around 84, right near the high from three days before. That same level of resistance persisted the next day as it retraced the price action and closed around the same level (6).
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On the intraday chart, a clear line in the sand formed at those tops around 84. When FAS stock broke above that area, we added it to SwingTrader (7).
Managing The Trade
We generally like to take a third of the position off with profit as soon as we can. It was no different with this trade. At 3.5% profit, we locked in that initial gain. (8).
Our goal was to let the remaining two thirds ride the 10-day line. As FAS stock looked to close below that level and breached the low of the last five days, we booked our remaining profit (9). We still had over a 2% gain from our entry but we had a 9% gain at the peak two days prior. Because of our gains locked in earlier, it was over a 2.5% gain for the trade.
The action has been back-and-forth in FAS stock since then. After a week's time, it's still around the price of our exit. But the trading range could set up another opportunity for a new entry.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on Twitter at @IBD_JNielsen.
