If you’re long Ligand Pharma (LGND), here’s a lesson for you. (October 15, 2018)
LGND
Today I want to look at Ligand Pharmaceuticals ( NASDAQ: LGND ). This is not a trade this is a trading lesson. The market is pretty user-unfriendly right now; I’ve got a couple pot stocks that I own because they’re working. Other than that, not so much, so I am just waiting.
We are talking about making sure that we can keep the money that we have made. You look at this stock after it squeezed and then broke out here in March. It started, not a nice little move higher but kind of a treacherous one. It rallied up, sold off and then finally kind of got it’s legs going; trading above the 50-day moving average the whole way up. From this breakout level it was, 75 percent, we can go back and draw a double here. At one point it was up over 100 percent within a years trading.
You have to look at this when it is like this; any stock not just this one. You have to look at this and say, “Okay, this is a stock, it’s working, oh my gosh it’s great, it’s awesome. I wonder how much higher it can go before institutions, before the big money that has owned this stock for quite a while, I wonder how much higher it can go before they start selling?” And then you could say, “I know what I will do, I’ll start drawing lines. In fact you know what? The 50-day moving average,” I’ll say, “You know what? If it falls below the 50 then I think it’s time for me to lighten up; maybe take it all off.” I don’t know, maybe you’re just buying it right now.
But you have to be looking at the downside. So you say, “I am liking this support line here. This thing could go up to $800.00. I don’t know, as long as it stays in this trend it’s my friend.” And so then you’re moving along, that’s okay. I don’t like to see a stock go down four days in a row; I don’t like to see four red boxes in a row. It doesn’t happen too often on this chart, not big ones like this. And then, okay, this is all right.
Now this is a problem. Now you have got 6 red boxes in a row; and what you’re thinking of, remember my original question, I wonder how much higher this can go before the institutions, who bought way back here, are going to decide they’re taking their profits? The market is pretty weak. Not many stocks at all are working, most stocks are not; most stocks are selling off. So what makes you think this stock is going to be any different?
So what are you doing? When it is closing below the 50-day moving average, we can draw a trendline here, forget about this one here, this is a low, this is a low, this is a low. So we start connecting these lows and this is the trendline, right here. When this starts breaking down, that’s okay, $250.00, that’s an even number; that will hold. The stock looks a little toppy but I think it’s okay.
When this happens you should absolutely be out of this stock. You should be out, you should be gone, frankly, just reducing a position. You are trying to hold this as long as you can but reducing the position here is a good thing to do. You should absolutely be out of all of it now. Don’t kick yourself but be thinking to yourself, you know what? I kind of held that a little too long. You are avoiding this part of the move. Even if you are super late in getting out think about the money that you saved. You saved yourself from losing another 14 percent even though you sold later then you really should. So you learn your lesson and you move on.
What do you say about, now it is at the 200-day moving average, this it the time to buy it. No, guys, this stock is done. It could bounce up here, fine. But look at the pain that is left behind on this stock. For every share that was sold some sad sack bought that share. There is a lot of supply overhead just looking to sell into any move. And if you happen to still be long, frankly, I would sell it now just because. But certainly keep a stop just below the 200-day moving average; if it falls there then you definitely want to be out.
So again, this isn’t a trade, this is a lesson. This is an instructional video so don’t mistake this and say, “Oh, I think I am going to buy Ligand ( NASDAQ: LGND ) here.” I don’t think that’s your trade.
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