When to Trade VS When to Hold

2020-12-09 | TG Watkins

Hey Market Pilots,

Usually I am a pretty active trader, but recently there have been many names out there which have given me significant signs that I should hold on for longer. So when and how do we decide to go from trading a stock to holding a stock longer term?

For trading, it’s mostly about finding the little setups that move because of bounces or quiet periods which build energy and must release it. It is like hunting for little rabbits and squirrels as they dart around, but really, you are on safari for the big game. You are looking for the names which will last for weeks and months with massive moves. What are the tracks we look for and how can we know which will be the big winners?

The first is volume.
Big volume. The kind of volume that indicates someone knows something and they want as much as they can get. This kind of volume can’t be hidden and so the secret gets out which elicits more volume. Those are the footsteps we follow and jump on board with.

A few sectors come to mind for that kind of volume that can’t be ignored. The first is cannabis, the second is electric vehicles. If you look around at names in both of those sectors you will see volume pouring into many names, followed by big moves in price. People want in and that will drive the price up, so hop aboard and enjoy the rising tide.

The second is strength.
But what does that mean other than price going up quickly? What I am referring to is the general performance of an individual name during market pullbacks or quiet times. If the market is pulling back or weak for a few days, but a few names you are looking at are not following suit, rather they are simply holding steady, then they have good relative strength. Look for stocks which don’t care that the market is weak or pulling back, because they are going to be the most energetic for when the market resumes its uptrend. It’s a sign that sellers are not present and no one is eager to get rid of their shares because they want to be in for the long haul.

Many names are behaving like this right now. Heck, many sectors and industries are acting like this right now. Find where the money is going, AKA, volume and strength, and it will help propel you to the kind of success you are looking for from the market. Just make sure you get out when the volume shifts the other way.

Over and Out,
Your Profit Pilot.