This was an undeniably powerful week for the stock market, and it wasn't just confined to the "Magnificent Seven." Participation was best in tech but spread out to other areas as well. But MCK stock's lack of participation is what prompted its exit.
MCK Stock Tightens Up After Earnings
This last earnings season was very hit or miss for stocks. For McKesson it was a hit. The 5.5% move (1) elevated MCK stock back to a resistance area from November 2022 around 400. There was a pretty big shakeout around the 21-day exponential moving average that partially filled in the earnings gap (2). But other than that, MCK stock held the bulk of those gains over the next few weeks.
Recognizing that earlier resistance area around 400, we waited until McKesson crossed the line with power and volume (3). That prompted its entry on SwingTrader. At the time, the tech-heavy Nasdaq composite was starting to get extended, so adding a stock outside of tech with such strong price action had its merits.
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Still, we followed our normal plan of taking off the first third of the position into strength once we had a 2.5% profit (4).
When To Sell More
The first sell into strength is fairly rigid in our rule book. The second sell is more nuanced. It can depend on market conditions as well as the price action of the individual stock.
For MCK stock, a strong move higher followed a few tight closes on the daily chart (5). Tight action can often act as a launchpad for another strong move and so we held our remaining shares even as we hit a 5% profit target (6).
But if a stock starts coming down, you also need to have rules in place to protect your profit. When MCK stock closed below its 5-day moving average (7), that's often a swing trading sell signal. But, how a stock closes is important. Since MCK stock closed well of its lows with supporting action, we held a little longer.
Even the move below its 10-day line quickly saw tight closes again for a few days (8). Tight closes on the downside can be viewed as a positive since the stock is resisting selling pressure.
But when MCK stock breached the lows of that area, it was time for the exit (9). It is especially notable since the weakness came during a strong rally in most stocks. Though we came off the highs, our exit was still above our entry and not far from where we took our first profit. Now we can watch for supporting action for another potential trade setup.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on Twitter at @IBD_JNielsen.
