Here’s how I traded Endava ($DAVA) over the past few months…and what I’m doing now. (February 13, 2020)
DAVA
Endava ( NYSE: DAVA ), I just want to walk you through this. This is a stock that we first began trading, it was on our Growth Stock List back when the stock was in this kind of cup pattern. It has been running up for quite a while but I wasn’t looking at it back then. So we are trading it here and then I remember suggesting, of course this looks totally premature now, but I remember suggesting taking partial profits there off of a quick trade-off of the 50-day moving average and then held the rest of the stock, bought some more.
This turned out to be a pretty decent size position of mine that I actually started back here on this green arrow. Back here when the stock had rebounded like this off of the 50-day moving average, it hadn’t even tagged it, that’s when we really jumped back into the stock. I think if you had a tight stop you probably got clipped here on this intraday sell-off. But it came back so quickly and recovered, so you are back into the stock here.
You zoom out, look at the different time frames and you can see, this has been one big long consolidation; not really paying you off much, a little bit, but you can kind of see what’s happening. This is a long, long squeeze, if you are looking at the stock every day this is the point, if you are looking at the stock every day you are going to wind up selling the stock because it is just boring you.
Here’s what you want to keep in mind: We are not in trading to be entertained. We are not in trading for excitement. And also, one thing I will tell you, and listen to me because I hope this isn’t you; it takes a heck of a lot more energy to trade crappy than it does to trade well. And I will say it again, it takes a heck of a lot more energy, a heck of a lot more work to trade bad, to lose money than it does to make money, to trade consistently.
That is something that a lot of people don’t ever seem to get their arms around. And that is, you find a strategy that works well for you and then you just stick with that strategy. But I don’t care if it is day trading, if it is trading the tick chart or if you are dividend investing and you are holding a stock for 8 years. The money is not made when you buy the stock. The money is not made when you sell the stock. The money is made on what happens in between.
One thing is for certain and that is all stocks, uptrending stocks, they move in cycles, they do this. They will do that, I don’t care if it is this type of thing, even if it is a downtrend they will move in these waves. And I am not talking about Elliott wave. Any analysis that you can retrofit to whatever you want it to look like is not an analysis that I am going to make money on unless I am selling that analysis as a trading system, which I don’t do.
But we do know that this is a perfect example of this stock: up and down, and up and down, and up and down; zigzag, zigzag all the way around. But when you see the stock trending sideways like this one thing that helps is, detach yourself from the price chart and just look at the moving averages; 50 above the 200, they’re all moving up.
There is no reason to be selling this stock. There is no reason to be selling it because it is costing you money; it’s not. It is costing you time, that’s okay, I’m sure you have a job. You can do something else with your time than sit here and watch Endava ( NYSE: DAVA ). So you are not selling it because it’s costing you money, you are not selling because it is making you money. You have some profit built-in but it’s no big deal.
You are sitting there, you have got an alert set. Maybe you have got an alert set on the downside just to give you the heads up. You’ve got an alert set on the upside somewhere in here and you are checking your alerts, maybe not every day, frankly, but certainly once a week. You just want to see where all of your alerts are set. And then the stock just gradually, boom, there it goes. It winds around until it explodes on earnings.
I sold out of my position today, virtually all of it except a small placeholder position. And I will tell you exactly why maybe I am poking my head out behind the green curtain and I am the Wizard of Oz; but I have been having issues lately selling stuff too soon. I find myself selling a stock for a nice profit and then 2 or 3 months later I look at it and it’s up much higher than it was when I sold it. And also I will look at a place on the chart where I did sell it and I am thinking; what the heck was I thinking of? And so this is something that I am working on. I have been doing this for over 20 years and I am still working on stuff. You never quite get it right.
What I suggest you do is go back and track the same stuff that I do. Go back and look and see, what did I do before, last week, last month, even last year? How is my trading progressing? Am I making some common mistakes and then can I fix them? And so the 2 takeaways, if you have got a trade that is working but it’s trading sideways, it’s not costing you money, it’s not really making you money but there is nothing really wrong with the chart it is just that, I want to make some money, I want to make some money.
A lot of times you are going to be better advised just to let your money sit in the stock, unless you just really need the money for something else. If you are just bored then go find another job; because the best traders that I know are ones that actually aren’t excitable when they are trading. It is actually a little bit boring; you are just looking at numbers and price actions.
So on this stock today, I sold out of most of the position and this is what is really controlling it for me; it is the weekly chart. If I look at this here, just extrapolate it into the future, what do you think the chances are that right here at $55.00 will turn out to be the top of the stock and now it is going to do that? The chances are basically between none and none.
I think, ultimately, the stock goes higher. It’s just after this kind of move, so big in one day, it’s due for a rest so I am sticking with a small position. And once it settles out a little bit, once we get more consolidation here I will be back in again. And by the way, the company is growing this is probably a stock that I will want to hold for a long time.
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