Building a Trade Part 2: Managing the Position (4/5/15)

We are now 3 weeks into our "Trade With Me" series featuring Home BancShares (HOMB). If you missed Part 1 you can catchup here.

 While the broad market has been choppy and weak, I feel that HOMB has held up quite well relative to the averages.

Taking a look at the Daily bars going back over the last 6-months we can see a clear breakout of a lengthy consolidation and now some more recent digestion above the breakout area.

HOMB Daily chart (6-months)

What stands out, in terms of relative strength, is how HOMB has been holding firmly above its 20 Day MA. The SP500 by comparison is trading below its 50 Day MA. 

For HOMB to be holding above its 20 DMA while the market is below its 50 DMA is a sign of strength for our new position. 

Due to the weak Jobs Report that came out Friday morning (while markets were closed), I would guess that the Fed will be even more convinced to keep interest rates lower for longer. That likely won't help the Financial sector and especially the more volatile Regional Bank space. 

Look for shares of HOMB to trade heavily early this week. Our focus will be to see how it handles this news and whether it can remain as a strong breakout candidate.

Taking a look at the Weekly bars, I would expect any significant weakness to find support near the $32 area and rising 20 Week MA. 

HOMB Weekly chart

A retest of this level would not do damage to the base breakout formation and we would still want to be holders above the $31.30 swing low. 

So far so good for our new position and we will just have to see how well it can hold up in the face of challenging news events and general market weakness. 

Managing a position doesn't mean jumping in and out at every wiggle that comes our way. Often to catch big winners you have to sit through some volatility and "uncomfortable" moments.

As Jesse Livermore famously said, "money is made by sitting, not trading." 

Our long-term strategy suggests HOMB is a strong risk/reward holding currently and we want to give it plenty of room to let the system's analysis play out.

Good luck trading!