Big money might be made in the sitting, but for swing trading, locking in gains tends to be the priority. With earnings season kicking in, more stocks are moving in big ways. But overall, the stock market has actually gone essentially sideways the past week. That made our recent sell in Trade Desk stock look even better. We sold with a profit and sat out the flat action.
How Trade Desk Earned An Add
Trade Desk hasn't been one of those super winners everyone wants to talk about. But it has mostly held its 21-day line as it trended higher the past couple of months. With a strong stock trending well, mild pullbacks to the 21-day line can be opportunities when the stock bounces.
That's when we added Trade Desk on an upside reversal as we initiated a half position on SwingTrader (1). What also set the stock apart was its relative strength line getting to new highs along with the price. Though we started with just a half position, we quickly added the next day as it followed up on the break of its downtrend (2).
This is the event that might be making for fast rotation according to John Kosar CMT
With some stocks, we've tried to hold them a little longer. That was the case with the SharkNinja trade featured in last week's column. But for most stocks, we try to do some selling into strength. For Trade Desk, our first trim was after scoring a 3% gain from our initial entry (3).
A Final Exit
How much profit do we look for? Part of that equation may use the average true range (ATR) as a guide. For Trade Desk, the ATR was just under 2.5%. Not high octane but also not as slow as L.A. traffic.
Once the profit from our entry approached two ATRs or roughly 5%, that seemed like an area to make a decision (4). We trimmed a little more, mostly to make room for faster moving stocks. Trade Desk didn't do anything particularly wrong. In fact for a position trade, the tight action is often an attractive attribute. The stock didn't even come down to its 10-day line as it held tight (5).
But for swing trading, that tight action might not be ideal while faster stocks are just starting to make their moves. In the end, we locked in a gain on the remainder of our TTD position while it continued trading tightly (6).
Now that we're a week removed, Trade Desk hasn't really done anything either way. But when considering the time value of money, locking it in was better than letting it sit.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on X, formerly known as Twitter, at @IBD_JNielsen.
