Here’s how you stay in a high maintenance trade for the duration of the move. Look at Broadcom (BRCM). (June 05, 2014)
Broadcom ( NASDAQ:BRCM ), what the heck are you going to do with this? I was looking at this and, true confessions; I decided not to trade it for a lot of different reasons, mostly just because I didn’t have the time to babysit it. Look at this, the first day here it gapped and crapped a little bit, it pulled back, so this tells you, “You know, it’s probably gone up too much, need to back off.” Then the very next day, this is where I was thinking this is a potential trade, but I just don’t have time to sit here and watch it. The trade would be if the stock, on the second day, where it gapped down just slightly and then closed near the high of the day. If the stock moves up above the high here of 36.05 on this day then everybody, all the knuckle heads even the ones that bought at the top, they’re all winners, because they bought down here.
Those that shorted the stock, and there’ll be a lot of those because that’s what happens when a stock really gaps up, you get a lot of professionals who will say “Well there’s a lot of demand, I’ll fill that demand and then I’ll buy it when the stock goes lower.” But they tend to be really disciplined. If the stock starts trading above the high here they’re going to start covering. So my thought was, if the stock does trade above there then go ahead and buy it because the stocks going higher. Well we can see that’s what’s happened, it’s not like a huge move here, almost 5 percent from this high, which is great, I’ll take a 5 percent move any two trading days without a doubt.
My point for doing this video is, I just want to point out this type of analysis to you and give you the rationale for it, it’s not just, “Hey, make this trade,” I want to make you a better trader. So when you see a stock gap up like this and then ultimately break to higher highs it’s really a buy signal. Now at this point you say, “Is it too late to buy Broadcom ( NASDAQ:BRCM )?” I couldn’t tell you, I don’t know how high the stock’s going to go. But I know this, volume is declining, which isn’t surprising, you look at the volume here; over all though, look at the volume bars relative to the rest of this here; so this is still really, really high volume, which is a good thing. It actually kind of gives me the sense that we’ll get even higher prices, but here’s how you stay in the trade; look what happened at the low here the very next day, higher intraday low, higher intraday low, higher intraday low. Once we get this breakout we get a higher intraday high and then one above that.
So my suggestion would be look at the intraday low of the last full day, and here we’re still making this, but you look at the intraday low of 36.79, you stay long this stock. The stock is at 37.79 now, you set a price alert for a little under 36.79 and you’re risking $1.00 for the privilege of staying in the stock and hopefully making more money. If the stock instead reverses and stops you out, that’s fine, you gave back a little of your profits, but that’s why they call it speculation not sure things. So you always have to risk giving back some in the order of the possibility of making back some. Broadcom ( NASDAQ:BRCM ) is a really screaming stock, it was a little bit to high maintenance for me to make this trade, but this is the type of trade you can make on these screamers. By the way, if it doesn’t breakout above that high, well then don’t make the trade; don’t forget about that aspect.
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