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Strategies:
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Potential Entry and Exit Points for Continuation Slam Play |
The continuation Slams that just keep going and going are
good downside moves. They have two common traits:
after the initial Slam, their price drops are typically more gradual
and consistent, and they typically have greater difficulty rising above
their 10-Day Moving Average (MA) line. Some of the best Continuation
Plays start as mild Slams - one-day losses of 8% or less.
Potential Entry
Points
Screen
for stocks crossing down through their 10-Day MA line with
a one-day price change of at least -8%, and average volume
of at least 100,000. Notice how much of the bar (the trading day's range) is below the
10-Day M A
line on the day it crosses down. If 80% or more of the bar
is still above the line, you may want to wait one more day
to confirm the move down to avoid a short play on a stock
that might bounce up off its 10-Day MA.
Potential Exit Points
As always, "if you've made enough, get out" is a simple
rule to follow. But sometimes you can leave a lot on the table or lose a lot of money quickly.
So if you want to consider a more mechanical and less subjective
exit, consider using the reverse of what got you into the play: a cross
up through the 10-Day MA line. Again look at what per centage
of the bar is above the line on the day it makes its bullish
crossover. You don't want to get wiggled out of a position
prematurely. Consider creating a 10-Day MA bullish crossover Alert to
be prompted for your exit.
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Charting Example for Continuation Slam Play |
 As
just described, the best Continuation Slams are typically
"mild" first day Slams, but they just keep going. Notice how
Abacus Direct (ABDR) plays down a bit more every day and never
can seriously challenge its 10-Day Moving Average line. During the period shown,
ABDR gave up $14 or 31% in a month, and continued to move down.
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Entry and Exit Points for the Pullback with Support Play |
The Pullback
play is essentially a reversal play on a smaller Slam. These
are typically strong stocks that are either pulling back and
resting before a further move up, or pulling back on some
poorly received news or other market condition. The support part of the equation is
the 10-Day Moving Average (MA) line, which may act as a springboard
for the stock as it pulls back to this support level.
Potential Entry
Points
Screen
for stocks crossing down through their 10-Day MA line with
a one-day price change of at least -8%, and average volume
of at least 100,000. Notice how much of the bar is below the
10-Day MA line on t he
day it crosses down. This play is a reversal of the Slam,
so the smaller the amount of the bar below the line the better.
To ensure you consider only the strongest candidates, you may want
to add a "MACD Bull is equal to Yes" to your screen. Consider confirming
the reversal by waiting for at least one day's action completely
above the 10-Day MA line before you take a long position - you can also automate the process by creating an Alert.
Potential Exit Points
As always, "when you've made enough, get out" is a simple
rule to follow. But sometimes you can leave a lot on the table or lose a lot of money quickly.
So if you want to consider a more mechanical and less subjective
exit, create a 10-Da y
MA crossing down Alert as a prompt for your exit. You could
also use a trailing stop loss order as your exit, based on your risk tolerance.
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Charting Example for the Pullback with Support Play |
 The
Pullback play can be a good "value" play as you are typically
picking up a relatively strong issue on a dip. At the time of this writing, Yahoo!
(YHOO) could be considered a good
candidate for the Pullback play. It closed just touching its
10-Day Moving Average (MA) line. The 10-Day MA has proved
to be a very reliable support for YHOO all year as it has
bounced back every time it touched the line.
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