RSS feedWhen I added funds to Portfolio A in September, I claimed that I would use some a portion of the funds to create a regular trading position to go with the other intermediate term picks. In very short time, I found Apple, Google, and Humana to be great buys for various reasons and had the portfolio full invested and swayed a bit from my original intent to trade this portfolio actively.
While I’m not a day trader by any stretch and have found myself swaying towards the investment side of the trading/investing spectrum these last few months, I realize that I created Portfolio A with a purpose and ought to be more disciplined. I bought Humana in particular with the expectation to trade it on an earnings breakout. The call was correct, but in the time it took for the stock to run, I became attached to the pick and didn’t take my profits as I should have. The result was an unmitigated failure and a loss of more than 20% on my position.
Having given the stock a few sessions to settle and looking for new opportunities, I cut ties with Humana yesterday. I would have been content to go to cash had the markets continued to be mired in a slump, but with the Bear Stearns news and some moderately good news about home prices, Centex presented itself as a good short term trade.
As you can see, the stock is on a three session streak with MACD performing a very bullish cross on its first up day three sessions ago. Buying volume has come in in force every day peaking yesterday with a push towards resistance at $26 a share. In addition, RSI has picked up strength reaching its previous high and crossing back through the crucial 50 mark. What we also see is that the stock has tested support in the $18.50 range three times over the last six months with decreasing selling pressure upon each leg down marking a strong set up for breakout.
I purchased a position yesterday with the intent to hold for a week or two. The next tests of this rally for Centex will be found in a cross over of the 5-day and 20-day moving average as well as a breakthrough the $26.50 resistance level on continued volume. After that, I see no trouble for the stock to reach a second testing point in the $29-$30 range. It is here that I will set my stop-loss and be ready to take profits as the stock has once before shown a false breakout to this level.
