Want to trade Facebook (FB) over earnings. Write down your plan. (July 22, 2016)
FB
In this video I want to look at Facebook ( NASDAQ:FB ). The company reports earnings on the 27th, that’s Wednesday. The stock is going to move in a big way. Now here’s the deal: I see some analysts are just bullish as can be and this is going to be $1000.00. And then others are saying, “You know they cant’ keep growing the way they used to, so maybe it’s time to be getting out of the stock.” I say this is what you want to do: You look at this Williams Accumulation Distribution Line. What this is, is a line based on the closing location value. Where a stock closes in relation to the intraperiod, here it’s a weekly chart; the intraperiod high versus the low. So closes in the higher part of the range are going to drag this indicator up. Closes in the lower part of the range, like here, are going to drag this indicator down. We can see the general trend is up, so on the weekly chart this is looking good. Your ideal entry point here would be $110.00 or so. This is where the 200-day moving average is, 40-week here, here’s the 200-day.
But here’s the thing, I want you to write your trading plan down on this BEFORE the company reports earnings. For example: If you decide you’re going to buy this stock if it pulls back to 110.00, write it down. Write down the number of shares you’re going to buy. Write down where, once you buy the stock, you’re going to put your stop to protect your losses, to protect you from taking a big loss. You’re going to write that down. You don’t have to commit it to memory, and here’s why: It’s not that I don’t trust your memory, take Ginkgo Bibloba, you’re good to go. It is because you want to have your plan written down and then you just execute the plan. You don’t have to think about it. You don’t have to say, “Oh my gosh! Oh, there’s something wrong with the stock. It fell $11.00.“Or it fell whatever it is. You don’t have to think about that. You can remain completely objective because you say, “If the stock pulls back to the 200-day moving average, I’m going to buy the stock. I’m going to buy this many shares. I’m going to put my stop here and that’s that.”
Now, the devil is in the details; because if the stock pulls back you want to be looking at it intraday and make sure you’re not just buying a falling knife. But at the first sign that the stock is starting to move higher, that’s when you pull the trigger. Because again, you’ve got your plan written down, all you need to do is execute it. Now, what about if the stock moves higher instead of lower? If the stock moves higher I wouldn’t really want to be buying that either. You can see what happened in January. The stock gapped up and, “Oh my gosh! I should have bought that gap, it went up another 10 percent.” Fine. Then it came back and filled the gap. Here, April, it gapped up and ultimately it came back and filled the gap here. The point is, buying AT the gap, if it gaps up, it didn’t really net you any profits. Again, yes it did here, just kind of a one-time deal. Typically, if the stock gaps up you want to sell into that. Know that the trend is intact and then wait for your entry. If the stock gaps down, you want to buy into that because you know where the 200-day moving average is. You know it doesn’t test that very often and when it does it pays to hop onboard. Boom! There’s your plan for Facebook ( NASDAQ:FB ).
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