Let’s go back to Voxeljet (VJET) and check on that trailing stop technique.
Discussed in this article: voxeljet AG ( $VJET )
I want to follow up on Voxeljet ( NYSE:VJET ) and then for reasons that will become obvious when we go to the daily chart as opposed to the 15-minute chart we’ll leave this alone and get to something else.
Now yesterday, in fact I might as well go back there for a second. Yesterday I was talking about this, it went up quite a bit, over 15 percent, which of course now it’s down 15 percent; it went up quite a bit and my suggestion was look, rather than get all freaky and just sell everything, instead keep a trailing stop on your position, specifically on part of your position. And then if the stock starts to roll over, you get stopped out of part of that position, and if it continues to roll over then you go ahead and sell it all.
So let’s see how that would have worked today. This was the last few days move, this is where the stock closed at yesterday, which is on Monday, and then today it opens. We looked at a 20-period moving average on the 15-minute chart, that’s the red line here. Specifically though, I remember I had it on an exponential, so that makes it a little different, which is fine, So the stock had in the past, again on this 15-minute time frame, been gapping up and then drifting back to it, gapping up, drifting back to it, gapping up, and then falling through it.
So what we’re looking for is at the end of the day, which is what we got yesterday, a move back above it, that was a good thing. So then today, and we’re talking about trailing stops here, so today the stock gaps down, here’s where it was at 9:45, again, the exponential 20-period moving average here, that’s the red line. This gapped below it, and it stayed there, started trickling higher, peaked above it just a second, then started drifting lower.
Now this right here is, and if you’re a short-term trader you really do want to pay attention to this. This right here is kind of a sea change because it did not continue above it; in fact it struggled with this key moving average and then ultimately started drifting lower. So if you’re watching this position intraday, which you want to after the stocks up 15 percent in a day, and that is even on the end of even a bigger move.
You want to be watching this intraday, you can have a tighter stop here or a looser one here; if you really want to get nuts you could have one down here at 62.00. I think in light of the way the stock was trading yesterday you want your trailing stop to be tighter than that, again because it’s just on a partial position. So let’s say you’ve got your trailing stop here, you wind up selling about 64.00, and the stock does not show signs of reversing.
So what do you do? Well, you sell the rest of it and you’re out even though the stock continues to go down. So if you use these moving averages that work, on these intraday time frames, what you’re going to find is, you’re going to have better results here in your trading, even though you’re not necessarily trading intraday.
When you see this stock move as much as it has, November first it was down at 34.00, it ran up all the way almost to 75.00, we’ll say 70.00, that’s a heck of a move, and you want to be protecting your gains while still letting the stock continue to run. The way you do that is with trailing stops on an intraday basis.
This is a type of strategy that you really should be able to apply to other stocks. The one specific aspect to this is, they’ve got to be high-flying stocks; they’ve got to be the stocks that are just moving up. If you’re keeping a stop like this on an intraday basis on stocks that aren’t really trending that much, you’re almost guaranteed to get stopped out, just by the ebb and flow of the stock.
So don’t overuse this idea of trailing stops, only use it on positions where you’re doing so well and you’re looking at them saying, “You know what? I just want to keep packing it on because this trades doing so well, but if this thing starts skipping a beat I want out,” that’s when you use a trailing stop on an intraday basis.