Want to know what a good Power Play looks like? Check out Acadia ($ACAD). Here’s today’s trade, and what you need to see happening next. (October 21, 2019)
ACAD
With ACAD ( NASDAQ: ACAD ); this is an interesting stock because it’s in what’s called a power play. The stock was up, at one point, like really, really big from the bottom here, actually, 100 percent, which from this low back here to this high in a very short period of time, like less than 2 months. So when the stock gaps up here and then it holds, that’s a real impressive thing.
So what you are doing is, you are waiting for this stock to consolidate a little bit, which it did. If I am trading this stock, and I didn’t see this until this morning, actually Mark Minervini pointed it out at a trading workshop that I was at, if I had seen this stock back here this is what I would have done. I would have drawn a trendline right up here and I would have said, “Okay, as I see it now,” and you can I can always revise this later, “this is the high. This is the low, this is the box that the stock is in. And so maybe if it runs up here above 44.00, back out the top of the box that could be good for a quick trade. But as I see the stock kind of peaked here maybe we will get a chance, if the drifts here, it stays within the box, it doesn’t come back down here but if it just kind of drifts around here and then gives us a break out above this little intermediate high, maybe we can get another play.”
The idea is that the stock is up so much so quickly that the only way that the stock would actually move higher is if it was simply in demand, EVEN after such a big move institutions are still interested in buying the stock. You could say, “Gosh, the stock should pull back.” Yes, it should, it’s up ‘too much’, it’s up too much. The stock needs to come down, boy, you have got to get out of this stock.” And then if somebody says, “Okay, yeah, well, what could disprove your thesis? What could disprove your reason for getting out of the stock?” And you would say, “Well, if I got a call from all my buddies at the big mutual funds and they said, “Hey Dan, you know what? We are actually still interested in buying this stock even though it’s up above 40.00, we’re still going to buy this puppy.” I would say if I got those kinds of calls then I would want to stay in the stock.
Well, nobody is nice enough to call me and so I have to assume what they are doing by looking at the price of the stock. And my assumption that they are doing that would be, guess what? Wait for it, a break out above this little intermediate high. So it doesn’t happen and I am not doing anything with the stock. Couldn’t care less, couldn’t care less. I have already set my alert here, not even looking at the stock. I totally forgot all about it. Couldn’t care less, I’m looking at something else; Hey, there it is. So only when my alert gets hit am I looking at buying the stock and then, of course, that is actually what we did today.
And so now what are you going to do with this stock? You just kind of have to hold on for the ride. It is too late to buy it now when the stock is up 8.25. What you want to do is watch the stock. And hey, if the stock actually pulls back a bit, and this was something I asked Mark about today, if the stock were to pull back here a bit for several days, this is a daily chart, if it pulls back then this would be a good thing. And this would be a secondary buy point. You are looking at this video saying, “Well Dan, that’s great. Nice job. Thanks for telling me what I could have done this morning but I can’t do now.” It’s not really a good use of your time to be watching a video like this.
But let’s say you didn’t do this. Let’s say you are not in this trade. If the stock comes back here and kind of tests the breakout and then starts moving higher, you are buying the stock here because it has tested the breakout and then you are keeping a pretty tight stop, so this is your second bite at the apple right here. So that’s a trade that I would look to be making on this.
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