Are you long MongoDB ($MDB)? If so, here’s how you could be more profitable. If not, here’s how you could have traded it…and how you can trade the next $MDB!!
MDB GV MDB
I want to look at MongoDB ( NASDAQ: MDB ) here; a software company. This I not a current chart, the last day of this is January 8th. I want to show you a trade setup that ultimately has turned out pretty well and it is still going.
If you look at the way this stock has been trading, a nice uptrend here and then it started to drift lower, below the 50-day moving average, ultimately, undercutting the 200. Now the 50-day moving average where it had been support back here, all the way through here, and even here where it had been support, now it is resistance here. You could draw a trendline like this and then the stock breaks out above it, fine. It goes up through the 200-day moving average, fine, it’s not my trade, not yet, and then it runs up back here to 150.00, which is kind of where it peaked there.
You can look and see how this stock has been trading, drifting lower like this and then finally it starts to work up here. So what happened back here, again, below the 200-day moving average, the stock was essentially kind of in a volatility squeeze. So this is a stock that has been on my watch list. When I see the stock starting to break out above 150.00, now I am getting interested; because it is breaking this trendline here on volume, huge volume, so that’s when you are going long. Then the stock runs up a bit more and you can see, though, it has come in for (this would be a really sloppy one), but what I call a touch and go. Where you look at the 200-day moving average as the runway, the stock comes down here and then ultimately takes off again.
So the stock is here; now suddenly what’s happening? The 50-day moving average no longer is resistance now it is support here. We’ve got a crossover and you are long the stock and you are saying, “Okay, I am long the stock, I see this little move here and I am going to keep a stop?” You can either keep a super tight one right underneath where this trendline is or you are taking a smaller position and you give it even more room because you are not risking that much dollar wise because you have a smaller position.
What you are waiting for is a second entry on a breakout above 160.00. You are sitting here and maybe that was the day or maybe this is the day, so here is where we are right now. In order to be profitable, at least in my view on this trade, you had to be watching it. The software index ( BATS: IGV ) has been on fire for a long time so you should have a lot of these software stocks on your radar. But when this ( NASDAQ: MDB ) really starts to get interesting is right around here. You are buying here and it’s early, it’s very early. Hindsight is always 20/20 trading is not.
So you are looking here and if you are buying here, you are saying, “Software is good. This is a really low consolidation. Can’t really say it’s in an uptrend when it’s below the 200-day moving average. The 50-day is flat, the 200-day is flat, and it’s the furthest thing from an uptrending stock. But I like the software, this is a growth company so I am buying the stock here and I am keeping a tight stop there.”
Frankly, there’s a pretty good chance that you get stopped out because it is a pretty tight stop. There’s a good chance that you are going to get stopped out and then lo and behold you don’t get stopped out. So this is one of those times when having an early entry has paid off and so by the time the stock gets up to here you’ve got a really nice trade going on; you’re up 20 percent.
I think this goes higher. The way this stock is trading here, it is still really in the base building process, and its forming the right side of the cup. I think if the stock were to pull back to the mid 150.00s, even all the way to 150.00, if it holds, I think that’s a good buying opportunity if it keeps going up. I think it is kind of too late to start a position but I would be adding to mine. If the stock runs up above 170.00 I will; I will add some and then I will be looking to sell right around $200.00.
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