Electric-car companies have captured investors’ attention. With their soaring stock prices, it’s no wonder. Workhorse (WKHS) is among the many stocks vying for a place in the winners circle by targeting electric-delivery vehicles. Here’s how swing trading Workhorse stock grabbed a quick profit.
Swing Trading Example: Workhorse Stock
The stock market correction in September didn’t treat all stocks equally. While some stocks came down hard, others resisted the downtrend. A select few, like Workhorse stock, actually shot up.
When the market topped on Sept. 2 (1), Workhorse stock was just about to start a run of more than 60% in the next couple weeks (2). Going counter to the market caused its relative strength line to soar.
Rather than bemoaning the stocks you miss, it’s best to watch and wait for the next opportunity. While you can wait for a stock to get to new highs, upside reversals and breaks of downtrend lines within consolidations can give you an early entry. That’s what landed Workhorse stock on SwingTrader.
A few things stuck out about Workhorse stock. There was the strong countertrend during the first part of the September correction. When the stock did correct it remained above its 50-day moving average line. On the break above its downtrend, volume on Workhorse stock was at the highest level in nine days and the relative strength line also broke above a downtrend (3). It was also part of strong technical action in many EV stocks.
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Taking Profits Quickly Avoided Negative Trade
With the entry of Workhorse stock on SwingTrader, the market was also showing a strong technical day as the Nasdaq 100 broke above its Oct. 1 high. As the day went on and got stronger, we eventually took our first round of profits.
We usually don’t take profits on the same day we put a stock on our current trade list. But when Workhorse stock gained more than 5% from our entry, taking some off the table seemed prudent.
With the stock moving nearly another 8% at the opening bell the next day, we took another 1/3 profit (4).
Workhorse stock climbed nearly another 6% that day, but the close was weak and gave up all of its gains. Since we only had a third of a position left with solid profits already booked, we had enough cushion to give the stock some extra room. But not much. The weak close was counter to the market strength and that put us on notice.
The following day, we exited the remaining position shortly after the open (5). We generally wait a little while before triggering a stop loss, often until the final portion of the trading day. In this case, however, we didn’t want to let it get worse, so we cut quickly. It saved us from suffering an extra drop of 15%. Not that we would have let it go that far, but acting when the odds are against you will save you from many mistakes.
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