Here’s how you can be a philanthropist on $ZM…and a look at some “pretty” charts in the home building sector. (September 01, 2020)
I want to take about Zoom ( NASDAQ: ZM ) here. There is no trade here, just so you know, so if you are just looking for a trade, just move on to the next whiskey bar. I want to talk about what we did here and kind of turn this into a lesson.
We have traded Zoom ( NASDAQ: ZM ) a few times in the past several months. It is the kind of stock where you look back at it and say, “Why didn’t I just buy it at $60.00 and hang onto it?” That’s not the way we did it but on this most recent trade, this is what I want to cover, we bought it on 8/20. We bought this stock right here; the reason was, first of all, it was Zoom ( NASDAQ: ZM ), it had gone up so much and then it fell down.
I just finished doing a video for members where I was talking about Dynatrace ( NYSE: DT ), which has kind of the same pattern where it fell below support. This was a stock that I covered in the IBD podcast and shook a lot of people out. But ultimately, it slingshotted higher and now it’s up at new highs.
With Zoom ( NASDAQ: ZM ) you have kind of got the same thing here. And so once it rallied back to a new high, bam, we’re in this stock. We sold half of the position yesterday just before the close for like a 15 percent profit, which was pretty good, I’ll take that on every trade, thank you. We were managing the risk and then when the stock ran up like it did we took the rest off this morning at $450.00.
Now the stock is up a little bit more and you could say that you should have held onto the stock. I would say, “No way.” The stock ran up like this, we had a nice trade; we’re in for 10-11 days, that’s it. And those aren’t trading days those are calendar days. So we are in for very few trading days and we are making this kind of money. That’s a position that begs to be liquidated so that’s what we did.
This is what I want to show you: Let’s say you were on the other side of that trade and you bought this stock. Yes, it zigzagged a bit during the day, but come on, you are not going to be top-ticking it up here, whatever. You are buying this for some silly reason like you think it is just going to keep running higher. And maybe it ultimately will, but not today. Not after the kind of move that this stock had.
And so HAD you bought this first thing today, this is what the rest of your day looked like. The stock ran up to there, it fell to here, which is fine, I guess, but generally speaking, the stock has been in this kind of trading range here. So you bought yourself an all day long sideways ride to nowhere.
My point is this, and this is really important; after a stock makes a move like this, this is not a beautiful chart. I have heard people say on some of these stocks, “Oh my God, that’s a beautiful chart. Oh my gosh, look at that chart, it’s beautiful.” And I will say, “No, that’s an ugly pig. It’s absolutely the worst chart in the world unless I was already long the stock, then I love it.” And so the idea is, you don’t want to be buying charts of stocks that have already moved so much and you are sitting there expecting them to continue. You want to be buying charts with possibilities, with possibilities, that’s what you are buying.
I covered a lot of these in my Strategy Session for tonight but I will just give you a little preview here of that. I am looking at the homebuilders ( NYSEARCA: XHB ) today and look at all of these stocks; these are pretty charts ( NYSE: TOL ). These are pretty charts because they show me possibilities ( NYSE: MDC ), ( NASDAQ: LGIH ), ( NYSE: TMHC ), ( NYSEARCA: DIA ), I haven’t looked at Pulte ( NYSE: PHM ) in a while, so they are all good. This is the home construction index ( INDEXDJX: DJUSHB ), nothing but home builders, so they are all good. These are the charts that are pretty.
This ( NASDAQ: ZM ) is not a pretty chart. Tesla ( NASDAQ: TSLA ), not really a pretty chart just because the real money is made by folks who bought back here. If you are buying right now you are kind of getting the dregs of the keg, you’re the last one in on the flat beer. So focus on the stocks that give you good entries. Uptrending stocks that give you well-defined entries. If you can do that I promise you that you are going to trade better.
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