Today is a great day to review why it is so important right now to be monitoring upward trends and why we should be trading for profits! Late yesterday, American Power Conversion (NASDAQ:APCC) disappointed the street and then guided analysts lower in the coming quarters. I had profiled shares of APCC as a bullish play back on January 18th at $15.50. I followed the trade for days and there should NOT have been one subscriber still holding the stock long today. NOT if they have been sticking with the discipline of honoring their trends. Every trader should have been GONE at a minimum of $16. Yesterday I updated the trade at 01:30 EST and it didn't look good then. Today it looks even worse!
American Power Conversion Chart - 60-minute interval.
Evidently I've still got some work to do when it comes to explaining how important it is for traders to honor upward trends. Any type of "bullish" stance on this stock should have been closed out before yesterdays close. Covered calls included. Yes, a covered call is a bullish play. If I owned 1,000 shares at $15.50 and wrote a strike $15 call that's still a bullish play as the bulk of my capital is bullish. If you wrote a covered call on this stock, take the PROFIT on the call, take your LOSS on the stock and move on.
Drugs sector tells us there's still some defense being played.
When technology stocks were getting drilled from September to December, the drug stocks as represented by the Pharmaceutical Index (DRG.X) was one of the big benefactors as the market played defense. We've seen a recent resurgence in the group and we can add this to our short, but growing list of "defensive" observations.
Pharmaceutical Index Chart - 60-minute interval.
Last Friday, I felt it was more important to take profits in a bullish index play in the DRG.X than to hold over the weekend and just ahead of major market news. Short-term that was a good idea as the DRG.X fell right back to our entry point near 400. Now the index is on the rise and trades at a higher high. This tells us there is still some "defensive posturing" in the market, but the market is still trading the group as indicated by the swings that are currently taking place. Traders should understand... if the market is trading for profits, then we should be too.