Here’s how you trade Clovis Oncology (CLVS). (September 22, 2016)
CLVS
I want to look at Clovis Oncology ( NASDAQ:CLVS ) today, this is why: The fundamentals aren’t that great because it is a biotech stock. They fight cancer and that means that they are not really fighting choppy revenue growth, right? So a lot of our traders, a lot of members have been involved in this stock for a while, I have actually covered it several times in the Strategy Sessions. This has really been kind of a momentum stock that our people or our ‘peeps’ as I call them in the forum, have been all over for a while so I wanted to cover it here. This is why: This was REALLY the first sign that the stock was worth buying. Now, “Oh, we could have bought it down here at 12.00.” Sure, and I could have been famous doing something else too, if I had just practiced harder. We didn’t. Instead you are looking at this stock and you see this massive high volume breakout. And frankly, what the catalyst for the breakout was almost kind of doesn’t matter, because you see this HUGE wide-ranging day where the stock advanced 25 percent on MASSIVE volume.
This is a power move, it is one that you get onboard here. And by the way, you had several days, there were several days when you could get involved, even here. Because after a big power move, like this, the stock is kind of drifty, drift a little bit higher on low volume relative the big advance here, but it is not pulling back. That tells you that this isn’t a ‘sell into strength’ stock. This is a stock that is still under accumulation. And so you are hanging onto the stock. You hang onto it, and right about now you are saying, “Well okay, I bought this stock at $25.00, now it is close to 30.00, I have got a pretty nice move. I have a pretty nice run going here. So what am I going to do? Well I am going to sell it because it has hit $30.00, so I am going to go ahead and sell it.” No.
What I am suggesting you do, and obviously we are in hindsight here, we are talking about 9/13, so this was a week ago. I am talking about this, realizing, admitting, acknowledging that you are not going to get these kind of moves all the time. You are not going to get these stocks that just keep running, and running, and running. If you could have a bunch of those in your portfolio at all times you wouldn’t be trading very long. Because you would be tired of trading and you would have enough money to buy your own island next to Richard Branson, learn to kitesurf along with him. So you don’t need to trade, because you have got all these high momentum stocks. You don’t find these all the time. So what you HAVE to do is WHEN you see a stock that is running higher like this, don’t be eager to sell it. Be eager to protect your profits.
So you start using a trailing stop. And this is really the trick (pay attention to me I am giving you pearls), if you are using a trailing stop all you are doing is changing the calculus of the risk/reward ratio. You are changing that, because you are allowing yourself to be in for higher prices, and that is not a risk, that is a reward. So you are giving yourself an opportunity to get greater reward by not selling. You are also cutting down your risk by not selling. What? Huh? Yes, you are cutting down your risk, because there is a risk MISSING out on profits whenever you sell a stock. There is always that risk that you sold too soon. And then along with that, frankly, goes the risk of after you think that you sold too soon, the risk of buying it back later, at a higher price, when you actually might have been selling at that particular point in time.
So what I am saying is, holding on to stocks that are trending puts you in a position to win. It puts you in to position to make more. Now, the cost to you of holding on to stocks so that they can gain more, the cost is that you are not going to be able to get out at the current level. Like you are looking at this stock here, it is at $30.00 and you are thinking, “Well I think this stock is topping at $30.00, so I have got to sell.” But then, “Well, wait a minute, Dan tells me to just set a trailing stop on these things and let them go more.” Okay, so fine. By doing that, lets say you are setting a trailing stop just kind of right along this line somewhere, if the stock hits your line you are out. Well then by definition if you get stopped out you didn’t get the best price. You didn’t get the best price. You gave up a dollar. Maybe you gave up two dollars. I don’t know, but you gave up some money and that was the price that you paid in order to have the potential reward of staying in for longer and at higher prices.
So lets just kind of see what happens here. The stock keeps going up and you keep raising your stop. It is walking right along the upper Bollinger Band. Now when are we looking to start really snugging up our stop? Well, when the stock STOPS walking along the upper Bollinger Band. When it starts to kind of drift sideways a little bit, then we are looking at this going, “Oh my gosh, as an Irish Catholic I am starting to feel guilty. I am making 66 percent from buying right at the top here; 66 percent in a month of trading. I feel guilty.” So what am I going to do? I am not going to sell. No, I am going to tighten up my trailing stop even more. Maybe I will set it just a little bit below the prior day’s intraday low. I am not even talking about doing that now, because this is still moving. So just draw a line along here. Let the chips fall where they may. Once a stock starts drifting sideways then you start looking at the prior day’s intraday low and you set it just a little bit below there. Anyway, just some thoughts on Clovis Oncology ( NASDAQ:CLVS ).
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