September added extra volatility to the market and an extra challenge for swing trading. The bigger movements made it easy to have the right stocks at the wrong time and get stopped out. With Qualcomm stock, an early trade lost but the next one was profitable.
Swing Trading Example: Qualcomm Stock
Qualcomm (QCOM) was among the semiconductor stocks that seemed to resist the downtrend that started at the beginning of September. To be sure, it took a hit. But not as much as many of the leading stocks or the stock market itself. That led to a relative strength line that hasn’t given up much ground.
We gave Qualcomm stock a try on SwingTrader as it cleared a prior area of resistance from the prior few days (1). We set our stop looking for a close below the low of the prior day. That put a roughly 3% risk from our entry. Too tight and the risk of getting stopped out early is greater. But too loose and losses can quickly damage your portfolio.
Get daily analysis of stock market action in real-time. Start every trading day with IBD Live!
The next day slightly undercut the low of our entry day (2). However, there was still the prior area of resistance that offered potential support.
The downdraft the next morning was substantial and quickly undercut our stop (3). It’s a good example of why we try not to react too quickly. Qualcomm stock ended with a slight gain and closed in the upper part of its range.
However, the strength was short-lived. The following day we removed the stock as the weakness persisted (4). After giving Qualcomm a few days without success, it wasn’t meeting our expectations. The stock got worse from there. Temporarily.
Don’t Let Stocks Drop Off Your Radar
Despite the failed attempt in Qualcomm, we didn’t lose sight of it. It remained one of the stocks holding up better than many. The support at its 50-day moving average was a compelling feature (5).
After some back and forth action, we tried Qualcomm stock again on SwingTrader (6). This time we were quickly rewarded with a strong gain the next day (7). We took a third off in profits in order to lock some in. That also helps us leave a trade profitable even if a downturn hits.
After a few days of creeping up, a downturn came in full force (8) after President Trump reported a positive test for Covid-19. Qualcomm stock fell with most of the market after the news hit. Like before, we waited to get a sense of direction first. We removed Qualcomm while we were still above our entry but undercutting the lows of the prior few days. Our thinking? Better to leave with a small profit than risk further losses. While not our best trade, giving Qualcomm stock another shot added value.
YOU MIGHT ALSO LIKE:
This post was originally published on *this site*