Think it’s far fetched to grab 40% in a week? Here’s how we did it on FarFetch ($FTCH) (November 06, 2020)
FTCH
I want to look a FarFetch Limited ( NYSE: FTCH ). I just want to review this trade; I think I have already talked about this in a different context when we entered the trade back here; the first breakout failed but not by that much.
We are holding the stock at 30.10; it breaks out again and so now what do we do? We are in right about here. Yesterday the stock was up over 25 percent where we bought it from, but after hours the stock kept running. So I hung onto it; we sold half, actually we wound up selling the whole thing because it was just too much profit to leave on the table with the stock up this much.
I have a couple of things to say. First of all, if you are still long, if you happen to take this trade with us and you are still long, this would be how I would trade it. It has been such a heck of a move you don’t want to give it all back. And there is a chance, just by nature of the steepness of this slope it’s got to come back some. And frankly, even if it doesn’t, how much higher is it going to go before it stalls out? So you are very, very late in this trade to be holding it.
What I would do is look at 41.50, that’s the low of the day, and I would keep a stop just a little bit below that. Again, if you happen to be long, no I wouldn’t buy it here and keep a stop below 41.50, it’s already gone. This is the thing that I wanted to show you as far as how to stay in these stocks: Look at the intraday lows, look at the intraday highs and compare them.
Here’s the intraday low, and here. Here are the intraday highs, here, here, here, here, and finally, here. So what is the common denominator? They are higher; each day shows stronger buying interest than the day before. The weakest that the buyers were on any particular day is still stronger than they were on the prior day.
In other words, they just would take the stock here, 33.50, and then the next day they are not even waiting, they will take it at 36.00, etcetera, etcetera. And so you can make a case that this is your appropriate stop. But if you are using this kind of trading technique then what you would be doing is; you see this here on the 3rd? And so you say, “All right, I am going to stay long the stock but the next day I am going to keep my stop right here just a little bit below the 3rds intraday low.” And then the next day, boom, the stock is up.
So what are we doing? We are keeping a stop, we keep the stop here, and we raise it up. And then the next day, well once again, we raise our stop up here. So each day that goes by we lock in the profits by saying, okay, if the stock falls below yesterday’s intraday low, that means that there has absolutely been a change in the balance of strength between buyers and sellers. This is a way that you can stay in a stock for longer.
You are not trying to pick the top. You are letting the stock tell you when the top, not is occurring or when it will occur. You are letting the stock tell you when the top HAS occurred. And the way it tells you that is, today’s intraday low is lower than yesterday’s intraday low. That tells you something that you haven’t been told all the way up. And so, so far, here we are. And so where would you put stop? Seriously, on Monday you would put your stop right there.; we’ll do red, we’ll do red, there you go. That’s how we are trading this. You’ve got your stop here into next week and for all we know, the stock is going to keep going.
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