The goal of our nightly newsletter The Wagner Daily is to buy market leading stocks that are breaking out from a valid basing pattern on volume and hold for 20-40% gains over a few weeks to a few months. How long we hold on to a position is up to the price and volume action.
Our style of trading fits extremely well with those who do not have the time to watch the market all day long. Every trade in our report is planned out in advance the night before and can be set up to execute during market hours using simple buy stop or buy limit orders. Every trade also comes with a protective stop to limit our risk if the trade does not work out in our favor.
Let’s walk through a recent trade in Zscaler ($ZS), which is a pretty good example of what we are trying to accomplish with this report.
The commentary and chart below originally appeared in our January 28, 2019 report, which was sent out the night before on January 27.
“There are three new setups on Monday’s watchlist. The first is a buy stop entry in $ZS which failed a breakout attempt above base highs last Friday. We still like $ZS due to the bullish base it has formed the past few months. Our entry is over Friday’s high. If setting a buy stop with a limit, place the limit no more than 50 cents above the trigger. If $ZS fails to move higher and sells off for a day or two, then a lower buy entry could emerge.
On January 31, $ZS triggered and closed with a 6% gain on volume that was double its 50-day moving average, which was a very positive sign (volume confirmed the breakout). After stalling at $50, we were sitting with a 6% gain heading into earnings after the close on Feb. 28. We don’t mind holding through earnings if we have a bit of a profit buffer and market conditions are bullish. As mentioned, our profit buffer was around 6% (10% or more is ideal), so we held. We were rewarded the following day, as $ZS gapped significantly higher and closed with a 20% gain on very heavy volume.
Although $ZS gapped 20% higher, there was no reason to sell as the price and volume action continued to push higher after only one down day.
(Please reference the following chart for all exits discussed below)
First sell – After a few days of stalling on 3/15 and 3/18, we sold partial size on the 3/19 open (a planned sell in our report the night before), which was sold for a 45% gain at (A).
Second sell – On 3/22, $ZS close below the rising 10-day MA on a pick up in volume with a bearish engulfing candle, forcing us to raise our stop on partial size. Our stop triggered the next session on the open for a 38% gain at (C).
Final sell – After the second sell, $ZS formed a bullish reversal candle and set a new swing high, so we raised the stop up to the low of the reversal day (3/25). On 4/4, the price sold off sharply with volume, slicing through our stop and the 20-day EMA. We were stopped out of the final shares with a 32% gain at (D).
We didn’t mind holding on to some shares for a break of the 20-day EMA, as the price could have rallied much higher before selling off (we never know).
Most stocks do not move out as fast as $ZS, so when we do catch a big mover we want to avoid selling for a quick 20% gain, as these stocks have the potential to run 40-50% or even double in a few months…. if we are patient (easier said than done!).
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