How to Profit from Trend Trading
April 4, 2017, 5:08 pm
There are many strategies you can use to make money in the stock market. One of my favorites when it comes to shorter-term investing is trend trading. With each trade, we are riding an already established trend – “established” being the key word. We’re not trying to call a top or a bottom in a stock.
This market has defied expectations already, going higher for a longer period of time than many thought possible. For trading right now, I’m not interested in trying to predict when a change will take place. I’m interested in profiting from what we know is already happening, taking what the market gives us.
So the trend really is your friend – and when it ends, you profit from a different trend. To give you a better idea of what I mean, let’s take a look at Advanced Micro Devices (AMD), a stock we made a quick 10% last quarter in my Absolute Capital Return service.
Let’s start with the chart below, which shows a general uptrend that began last November with a pretty sharp pullback to start the year. I love to buy strong uptrends on pullbacks to dampen risk and open up more profit potential, but this one was sharp enough that we needed confirmation the uptrend would resume before getting in. We got that confirmation with a strong bounce, at which point we were looking for the right entry point, which came on February 16.
I waited until we saw the action slide 9.5% from the established $14.27 trading top and then start at least tentatively forming a new base for a fresh move up. The test of 9-day support (the green line) gave me enough confidence to push the button.
AMD fell slightly and briefly below the 9-day moving average, but the balanced volume bars (below the price action) argued that the bears weren’t in control – those red lines would have to be a lot bigger than the gray ones to break the long bull trend. After that, the profit meter was running fast enough to let us cash out within the week.
I expect to scoop up more trades like this over the next few weeks – especially as stocks start to move heading into and out of their earnings reports. This period right around the start of earnings season is often a busy (and profitable!) one here in Absolute Capital Return. If quick-hit technical trades like the one I talked about today sound interesting to you, then you couldn’t have picked a better time to join us. Click here to claim a risk-free membership before it’s too late.