Weekly Update (6/26/2017)

Update: We Still Got It

Wow.  What a week.

We've been saying it for weeks now.  Materials and biotechs.  It got to the point where our hands were on autopilot, pounding the table endlessly until it was drilled into everyone's heads.  We hope you boarded the ship before takeoff, because this week we saw one of the best moves for biotech in months.  Friday could very well have marked a steel breakout, and if you took trades in GILD, CLF, or MYGN, you should be happy. 

We initiated short-term positions in BOFI and started a small, long term position in TGT, as discussed in last week's email.  We also closed some of the trades that we had going, such as GOOS and BAC, because we think the majority of the move here is done.  We're excited for the movement this week, and hope that it gets off to a start that rivals how we ended last week.

 GILD finally broke out this week, and what a beautiful sight that was.  The best part is, the long-term prospects of this stock look very enticing. This move might just be getting started.

GILD finally broke out this week, and what a beautiful sight that was.  The best part is, the long-term prospects of this stock look very enticing. This move might just be getting started.

Short Term

We've got money waiting on the sidelines, but we plan on spending a lot of the beginning of this week watching and reacting based on how the market moves.  We saw a potential breakout in X, AKS, and CLF on Friday, and a continued move higher could signal a longer-term uptrend in the stock.  If it rejects this move higher, we could be headed back to sub-$20 for X, which as we've stated plenty, is a great place to purchase this stock.  We plan to add if it returns to this level it's been bouncing off of for awhile now.

Biotech is still one of our main focal points here, and we want to buy any weakness in the sector.  This group is starting to awaken, and any stocks in the industry that haven't yet made their move are big targets for us.  Keep an eye on CELG, OPK, and ONCE.

We also want to advise caution against jumping into an oil position without doing proper research.  The entire oil industry hangs in the balance, and our eyes are going to be glued to our screens all week to see which way this one goes.  If a bottom is established, look to our personal favorites COP and CHK.  There might be more pain to come for these guys, though, so proceed with caution, and set your stop losses.

Strategy

 

When To Exit a Position: MYGN Case Study

In the past few weeks, we've mentioned a trade in which the stock MYGN would make a move from $20 to $30 through a volume pocket that we had identified. The stock is more than halfway through the move; we bought out of the money calls that are up more than 1500% to date, and closed a shorter-term position earlier this week for 450%+. We ended up exiting one of the positions earlier than we thought due to specific, and frankly worrisome stock price movement.

Here are two charts that demonstrate the indicators for when to exit a position:

 Steady growth slowed after a large price gap formed, which is usually followed by a consolidation period. 

Steady growth slowed after a large price gap formed, which is usually followed by a consolidation period. 

 A zoomed in look at the short-term top in MYGN

A zoomed in look at the short-term top in MYGN

The most obvious evidence for this short-term top came from three distinct movements toward the $26.90 price that were clearly rejected. Two of the three movements are closely bundled in the second peak and are separated by an hour or two. The top is shown by a solid red line in either graph.

While we originally wanted a movement to $30, this price action was hard to ignore. When a stock rejects multiple moves to a certain price, it means there is a strong seller located at that position that is preventing further upward movement. All three of these moves were within cents of one another, indicating a large limit sell order at that price by a significant shareholder.

While we did sell one position in the ticker to lock in profit, we held our other because we believe a move to the $28-$30 range is still possible. In fact, the stock behavior after these rejected moves is very healthy considering the drastic price change in the last few weeks. A much scarier scenario would have been a rejection of the $26.90 price followed by a steep decline and loss of previous gains. This "bouncy" consolidation is expected and allows the stock to accept the current price before beginning another march up to (hopefully) our price target.

TL;DR:

While you can try to chart out stock movements, you need to be flexible and adjust your plan based on how the market acts. Don't be stubborn about making as much profit as possible, sometimes it's better to be safe than sorry.

Happy Trading

- The Minotaur Team