Tuesday, July 30, 2013

Removing Prospect Mosaic(MOS), Introducing PPG (PPG)

Our weekend update lesson couldn't have been timed better. This weekend we discussed why we use price action as our primary investing/trading strategy and used Mosaic and PBW as our example. Please read the Weekend Update if you have not seen that post yet. But the example shows why we try to identify the strength and weakness present in the market and avoid the latter. Today MOS showed enough weakness that I am removing it from our prospect list. When the original thesis for a trade/investment no longer exists, you must admit defeat and move on. Our primary objective is to cut our losses short and let our winners run; while we never held a position in MOS within the Portfolio, I did have hope for it to materialize into a winning investment. Here is what happened today to eliminate it from our consideration going forward:

The trade below the Inverse Head/Shoulder "Head Low" effectively kills this pattern setup. This was my 1st, 2nd, and 3rd reason for being interested in this stock. Now that the setup is gone, there is no more need to waste our time and resources on it. We are moving on.

New Prospect 

PPG (PPG)
Sector: Basic Materials/Specialty Coatings/Chemicals

Replacing MOS in our Top 10 prospector list will be PPG. PPG is in the Basic Materials sector and is an global supplier of paints, coatings, optical products, specialty materials, glass and fiber glass. They are an industry leader and also (my personal favorite) Relative Strength monster!

As you can see, this is in a monster uptrend, all-time highs every few weeks it seems, and is a serial outperformer vs. the SP500 since the 2009 low. What is nice about a trend like this is the risk is very well defined as all we have to do is follow the uptrend and when that fails we see an easy exit. That's all it takes to follow a trend folks. Use the prior swing low as your stop loss and anything above that level is a hold. Our most recent swing low is at the $144 level and that is the level we will trade against.

We are seeing the potential for an entry very soon here. The Relative Strength shows a potential breakout from an 8 month wedge pattern and if prices close the week above $159 it would signal an all-time weekly closing high. If we see a close above that level, our Blog Portfolio will enter near the close of trading on Friday. Watch that $159 level closely!

No comments:

Post a Comment