As much as I try to cover in the market monitor on a daily basis, there will undoubtedly be some good trades or action that slips by. Yesterday, shares of shoemaker Kenneth Cole (NYSE:KCP) surged higher after increasing Q1 outlook to $0.26 a share, compared to previous guidance of $0.16-$0.18. The MARKET responded by bidding the stock up 24% from Friday's close.
Kenneth Cole Chart - Daily Interval
Subscriber's have seen similar chart pattern in recent past as highlighted in Oxford Health (NYSE:OHP). Stocks that build some large bases and then gap higher on BIG volume often times becomes a "market realization" of longer-term bullishness. The gaps usually come from some type of "news" where a company beats earnings estimates, guides earnings higher, or announces a breakthrough product that will eventually drive earnings to the bottom line (or at least perceived to). For the technical trader, all that really matters is the "market realization" of bullishness. The "break away" gap can be the first stage of bullishness. Then later, the second stage of a "running gap" can take place when prior MARKET belief is confirmed and the final "exhaustion gap" comes when all the good news hits the markets. Bulls that have been hesitant to buy the stock during a torrid run higher finally can't resist chasing the stock and eventually end up buying a "top" as the smart bulls that came to the stock early sell as all the good news has been built into things.
Even when a trader "misses" a move like I did yesterday in KCP, that doesn't necessarily mean there isn't a potential opportunity to still benefit. Late last night in the market monitor, I outline a day trade for fellow shoemaker Genesco (GCO) that could have a bull looking for bullish action today. The scenario was for further bullishness in Kenneth Cole (KCP) to drive bullishness in the "shoe sector" that a Genesco (GCO) bull might ride for a short-term trade.
Genesco Corporation Chart - Daily Interval
While stocks can always exceed their bullish or bearish vertical counts, I decided to profile shares of Genesco (GCO) only as a day-traders bullish play. I liked the setup of a bullish play using KCP as the "catalyst" stock to at least have sellers backing off and looking for higher prices as bullishness built in KCP. That created an identifiable target of $28.25, which is just below the recent high. That gave a short-term trader a stock to look at with very little overhead supply nearby. I also note the nice bounce the stock got from a rising 50-day moving average, indicating that other MARKET participants were indeed watching/trading the stock bullish.
While there are no "easy" trades in the MARKET, some are "easier" than others.
Throughout a trading day, we will often times mention stocks on the move (up or down) and any news we can find that may be driving the stock. A good trader that knows of some "similar" stocks in a sector can sometimes find some good trade setups in similar names.