Here’s how I’m trading Penn National Gaming ($PENN) – March 19, 2021
PENN
I want to look at Penn National Gaming ( NASDAQ: PENN ). I think Penn ( NASDAQ: PENN ) is at a really good entry here. A few days ago, earlier in the week, it was announced that Penn ( NASDAQ: PENN ) is going to be added to the S&P 500 ( INDEXSP: .INX ) and that is always a good situation.
This is what happened back here when it was announced that Tesla ( NASDAQ: TSLA ) was being added to the S&P 500 ( INDEXSP: .INX ). And then, if I recall correctly and I am probably off by a day or two, I think the stock kind of peaked when it actually was added to the S&P 500 ( INDEXSP: .INX ).
We don’t want to get ahead of ourselves on Penn ( NASDAQ: PENN ), but I think that this pullback to the 50-day moving average, it doesn’t happen very often, today, Friday, was the day to be looking at buying this stock on this pullback, it just doesn’t pull back to the 50.
On stocks like this, before I buy, I will start drawing some lines here, they are just designed so as I am looking at a stock and saying, “Yes, I want to buy this stock. But wait, what do I expect the stock to do, to where it would still be okay with me if the stock did this would I still be okay with buying it?”
And so I will do this type of thing (I just call this envisioning lines, you can call them whatever you want), I will drive out the 50-day moving average like this and then look at what the stock has done in the past. It looks to me like this would be totally acceptable for the stock to do this; to run up, even pull back for a few days, maybe even test the 50, maybe even undercut it. But generally speaking, what I am looking for is for the stock not to undercut Thursday’s intraday low.
This is how I would be planning this trade, I would say I am going to buy it here and I am going to keep a stop right here. I am going to keep it right below Thursday’s intraday low and then if the stock just continues to do this, that’s great. If it runs up here to 130.00 I am not going to freak out and sell it falls back to 120.00.
My initial risk takes into account that the stock could fall, from where I buy it, all the way down to here, give me a 5.5 maybe even a 6 percent loss. And so I base the number of shares that I buy on the risk per share. Like we will say $7.00 a share is what I am risking, so how much would I typically choose to risk, what’s my maximum risk on any given trade? And then whatever that maximum risk is $700.00, $1,000.00, $10,000.00, whatever. Divide that by 7 and that’s how many shares you are buying. That’s how you are getting into a trade like this.
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