Not all squeezes work out…which is why you should wait until they do. Here’s your trade on CareDx. (December 20, 2018)

by DAN CDNA 
I just want to look at CareDx ( NASDAQ: CDNA ) here real quick and here’s why: A week or two ago this was a stock that I was looking at. The market has absolutely been stinking up the joint yet this stock had been doing pretty good. I was looking at this quadrant here; I had a note here: Still in a basing pattern, I make these notes to myself just so I can go back and say, “What was I thinking then? Because I want to keep some continuity there. I was looking at this; it is still in a basing pattern. It is not a stock that I want to buy but I definitely want to watch it.

So think about this in your own trading behavior. This is still in a basing pattern; I never bought this stock. But as I am looking at it here, on the 26th, now the stock is up 8 percent or so and you think, I should have bought that stock when I was first looking at it. Well, yes but it wasn’t set up right for me.

I remember thinking; I’m going to regret buying this if I do. So let’s just kind of see how it plays out. In fact, now I remember, that is actually why I wrote this note, because I wanted to kind of pin myself down. I felt like buying it but I didn’t because it didn’t give me the right setup and then here we go so we are back where we started. So it was a good thing that I didn’t buy it there but, hey, it’s still okay.

So I look at this and my decision to not buy it here was good because even though it went up nicely it wasn’t too long before the stock came back down. And this is why I did not buy it, because we are still in this kind of trading box here. So I want to wait. I’m waiting, I need it to tighten up more and it’s not tightening up more but it is still doing okay, right?

Here’s why I am mentioning this: By now if you are watching this stock every day you might be getting impatient and say, “You know what? I am going to buy this stock. It’s been another few weeks I am going to go ahead and buy this stock.” And now this thing happens. And so now you really feel like an idiot for having bought it. The stock is down on a percentage basis, from where I made this note, almost 17 percent. So here it is and then we get this and another move lower.

The point is, squeezes work both ways and they don’t all work out, not at all. So you have to identify the squeeze and then you stalk it; you wait for the setup and then you wait for confirmation. This, for example, is a pretty good example of that. Now, there are a lot of things wrong with this chart and I can’t tell you that I would have bought it here, I probably wouldn’t have. The stock is still okay, it’s tight but I don’t know, it is just below the 50-day so there were some things wrong with this too. Plus it is too far up above the 200-day moving average, etcetera, etcetera.

But at least when this happens on heavier than average volume, much heavier than average volume; At least when this happens you can recognize it and say, “Wow, high magnitude move, much heavier volume than usual. Popping out of a squeeze, back above the 50. Huh, this could have some legs. I think I will maybe buy some or at least see if this squeeze is going to continue to work.” Boom! You’re in. You’re in right here. This is a trade right here and then the stock does what it does.

What I am saying is, this is not the same kind of trade. This was NEVER a squeeze like this. NEVER. It was up above the 50 versus below and that’s a good thing. But it still didn’t meet the criteria. So you stay away from it and in this case, seriously, I’ll say it, I am kind of patting myself on the back for NOT making this trade because it would have been a losing trade.

I keep track of the trades that I was going to make and don’t. You would be amazed at the number of times where you look at it and say, “It’s a good thing I didn’t make that trade because I would have lost my butt.” And so I want you to start doing that too. Don’t just keep track of stocks that you are trading. Keep track of the stocks that you were thinking about trading but didn’t. Write them down, keep some notes and my bet is, in 2019 you are going to have a heck of a lot better performance than you did this year.

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