United Airlines stock offered early entry and helped cushion gains.
Revenue season is starting to pick up speed. That can present some challenges to a dynamic business strategy. Mostly because we tend to avoid adding positions if earnings are too close on the calendar. That limits our universe to rule. For the stocks we hold, we often sell before earnings for most stocks, even if we have a profit cushion. But there are exceptions. For United Airlines stock, it was a rare case of earnings. Here’s why.
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The market changes its trend. Can it last?
How early entry can change your swing trading game
As this column has emphasized, the preferred setup for swing trading is reversal at support levels. United Airlines (UAL) provided a classic example. The 50-day moving average is broadly spread, then higher and closes at the top of the trading range. (1). Not only do we get in early, but we also get a clear signal when we’re wrong. A move below the reversal low means the stock needs to consolidate further.
As an introduction, the inversion itself is an acceptable entry to begin with. For a little more proof, you can wait for the stock to break the high of the day before reversing. That’s when we added United Airlines. SwingTrader (2). Although our price was higher, we had a more critical mark. The downtrend appears to have broken more decisively and the stock has risen above its 21-day line.
Trimming to strength and raising stands
This year, we’re starting to cut harder into strength to lock in some of the benefits. With United Airlines, that started the next day when we had almost a 2% gain and a quarter position. (3). After a few days we get a strong gap (4)we have locked in a profit of 10% of our revenue in another quarter. The strategy means that you can give a share of the stock for a small entry. It causes your sales to shift to strength so the stock goes down a bit to turn into a losing trade.
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What’s even better is when a stock gives you a reasonable place to increase your stop to secure a profit. United Airlines has fallen a bit after finding the gap (5). But since there was another reversal, the low of the day provided a logical place to raise our stop and still make the trade a healthy profit.
Deciding to stay on United Airlines earnings
With the earnings report coming up, we decided to make a decision on our position. We had a 10% cushion and the expected range was roughly half that based on the options market. That gave us the flexibility to hold onto the position and maybe even drop to the lower end of the expected range, but he was able to come out ahead. To help the balance work more in our favor, we adjusted another quarter ahead of the earnings announcement. (6).
The initial response to earnings was positive and we added back the last quarter’s harvest. (7). But as the trading day wore on, the excitement faded. We encountered a downside reversal that was the evil cousin of our favorable setup. It was enough to leave the remaining position for the day and lock in a healthy profit before further weakness occurred.
Additional details of past trades are accessible to SwingTrader subscribers and testers. Free trials They are available. Follow Nielsen on X, formerly known as Twitter, at @IBD_JNielsen.
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