$QFIN triggers 8-week hold rule | On Watch: $CHWY, $CRWD, $VEEV, $DOCU, $BAND, $BEKE, $TTD

Trading

So first of all a heads-up that today the market is closed due to President’s Day in the US.

 

And as George Washington famously said:

“To be prepared for war is one of the most effective means of preserving peace.”

And our war is the stock market!

To preserve your inner peace you need to be prepared when the market opens and have your game plan ready.

 

Let’s go over some interesting charts and see what a trade plan might be. I’ll go over some stocks that just moved through a pivot point but are well within buy range for a new position.

I will also discuss some charts that are setting up for a potential buy in the near future.

At the end of this post I’ll go into my recent $QFIN trade and the 8-week hold rule it has triggered for some more explanation about my trading strategy.

 


First one I’d like to share with you is $CWHY. This one is breaking out of a nicely formed bull flag.

The trading volume on Friday was strong enough to support to move through the pivot point at $115.37. But still not really above average which I normally look for.

In December Chewy has already shown it’s potential for run up quickly and offer good profits in a relatively short period of time.

Exactly the kind of trades I want to make.

Back than it gained over 50% in just 24 days, after which it had a short profit taking dip and quickly recovered from that as well.

This consolidation period might have prepared $CHWY for another run.

 

$CRWD is moving through it’s pivot point. Trading volume is not yet strong enough for a real conviction higher.

This looks a lot like the $CHWY chart from above, including the almost 50% gain in December and a short correction afterwards.

When more volume is coming in this is a definitive buy, otherwise it can be a safe trade as well if you want to be in it early.

 

$VEEV trading just above the $314.09 pivot point. Also it lacks enough trading volume for a real conviction to go higher.

It might trade around the pivot point area for a few more days before making a move, which can offer you a good buy point.

Last Friday it closed within the 5% max chasing buy point. Although I always prefer to buy it within 2 or max 3% after a breakout for optimal risk-reward.

 

$DOCU right at the pivot point from a consolidation and contraction pattern.

Looking strong and ready for a breakout. Needs more volume to push it higher.

Or it might form a short handle next to this contraction pattern first.

Either way it’s a strong company and has been a great trade last year as well, gaining over 100% in about 2 months.

This shows the potential DOCU has for another run.

 

$BAND is forming a contraction pattern and working towards a break of it’s $190 pivot point.

If it can break through it’s pivot point on good volume this is a great buy.

It might retest the pivot resistance area before making it’s move. Watching this one closely as well.

 

$BEKE working on an IPO base since a big run up after it’s IPO.

You could have more than doubled your money when you bought it at the IPO.

Which to me is a no-go. I don’t like to trade IPO’s too soon after entering the open market.

Simply because there is no trading history to analyze. So I can’t find any support or resistance areas and don’t know which price levels are interesting as a potential buy.

In this chart it is easy to see how $BEKE is developing recently and what price level looks like a potential buy price.

Having a consolidation period after doubling is a very healthy reaction for a stock.

Ideal pivot point is at $78.10. I’ll be watching how this chart is forming the coming weeks and see if it offers a good buy.

 

$TTD great former stock and strong company. Looks like it is working on a new base which might result in another buy opportunity.

Still needs some good price action in order to become interesting for a potential buy, but I like to watch stocks like these develop to be on time when a good buy point presents itself.

 

$QFIN Triggers 8-week hold rule

One of the hardest CANSLIM rules to me is the 8-week hold rule.

In short it means that if your stocks gains over 20% from an ideal buy point within 3 weeks time you should hold it for at least 8 weeks.

This rules should be applied to true market leaders that are showing good relative strength compared to other stocks.

You don’t want to hold on just any stock too long and give away your profit.

True market leaders are stocks that have strong fundamentals and more of the CANSLIM traits like good institutional buying power behind it.

The hard part about holding a quick winner for that long is that some investors are going to take profits off the table. Causing the stock to pull back, either a little but often a pretty sharp.

So you can see your nice and quick 20%+ profit get smaller pretty soon.

But as history shows when a stock can rise more than 20% in a matter of a couple of weeks it is likely to become a real big winner, so you want to hold through a possible profit-taking dip.

After the 8 weeks from the original buy point you can take profits or continue to hold even further.

If the stocks is a true market leader the initial 20% profit will off course already be a lot bigger during these weeks.

If I have a solid gain and good enough profit cushion I often hold on as long as the chart action is looking good to me. And as long as the general market is going in the right direction as well.

I’m a little more protective of my profits and mostly sell half of my position during the 8 weeks when I see a profit-taking sell off starting to take place.

The remaining half position will stay open and follow the 8-week hold rule to see what it offers me.

 

In the chart below of $QFIN you can see that on the 7th day after breaking out it was already up over 20%. Thus triggering the 8-week hold rule.

For now I don’t see any reason yet to take profits on my position, which is currently up 54%.

I’ll be watching for some sort of consolidation or sell-off when investors start to take some profits off the table.

In that moment I’ll probably take profit on 50% of my trading position just to secure my gains.

The remaining position will be following the 8-week hold rule which means it will stay open somewhere until the 12th of March.

As long as a possible sell-off is not erasing all my profits off course.

 

Enjoy this President’s Day, and let me know what you are watching this 4-day trading week!

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