These are stocks recently added to my watchlist. They include CTVA, SE, DCPH, AYX, and AVLR.
Each weekend (or two) I go through my scanners and write down stocks that are close to my criteria for triggering a trade. This is the “uncut” list.
I then go through my watchlist and actually look at whether each trade has a decent reward:risk profile, and will reassess the actual chart. Sometimes a stock that isn’t so good looking makes it onto the list because I am quickly going through hundreds of stocks to find a few decent ones.
Just because a stock makes it to the watchlist doesn’t mean I will trade it. Out of about 20 stocks that make it to the watchlist, maybe 1 will result in a trade!
A trade may not happen for several reasons:
- Trade is about finding the best opportunities. If there are five good looking trades, I am going to pick the 1 that looks the best. This way, I am not using up my capital on mediocre trades.
- The trade may not trigger. For example, I want it to break above a consolidation to enter me into a trade and instead it starts dropping. This is very common.
- The trade may have the potential for a setup, but it may take a couple more weeks of price action to see. In this case, I literally am just watching it to see if it forms a setup that meets my strategy requirements.
- If the trade hasn’t triggered, the company’s earnings may get closer and closer. I don’t like taking swing trades right before earnings. I want to give the trade enough time (estimated) to reach my target before earnings are released.
- Upon closer inspection, I don’t like the trade. The favorable reward/risk may not be there, there may be lots of gaps on the chart (exposes me to additional risk and slippage on stop losses), or maybe I find the stock is highly driven based on anticipation (like a pharma company awaiting FDA approval) and therefore could be susceptible to a massive over-night decline if things don’t turn out.
These are stocks that got added to my watchlist this week.
Based on the above, that doesn’t mean I will trade these, but they are in interesting positions.
Corteva (CTVA) is forming a potential setup. I like the chart, but ideally, I want to see the price action contract and consolidate between $33 and $32 (approx.), and the longer it does that the better. I would then want to see the price break above the top of that consolidation. Patterns like this can be very powerful in newly listed stocks, but for me, I need the above conditions to occur before I get involved.
Sea Limited (SE) is one I already own from near $38. If you look at the chart below, that original entry (first up arrow) will give you an idea of what I want to see in the stock above (CTVA) before I enter long.
While I already own this one, it is nice to see it still pops up on my strong stock scans. It is performing well, and another pop above $47.52 could set up a short-term opportunity for a run into $50. It blows through that, I will utilize a trailing stop loss with the next target near $53.
Deciphera Pharmaceuticals (DCPH) is forming a triangle after a big run-up. In the swing trading course offered on this site, I say to stay away from pharma and biotech stocks. That is good advice for new traders. But if you understand the risk, and adjust your position size accordingly, just like any other stock, pharma and biotech stocks have nice setups.
This is not a trade yet. Ideally, I want to see the stock consolidate near the top of the triangle. Otherwise, I want to see a strong move out of the triangle on a one-day move with the price closing near its daily highs and well outside the pattern. I am looking for an initial target near $84 to $85.
Alteryx (AYX) and Avalara (AVLR) both have nice cup-and-handle setups forming. These stocks also have earnings in the next couple of days, so I won’t trade them till after earnings. Maybe the setup will still be there, or maybe it won’t (stock has either jumped or dumped). I include them because right now they are looking good, and I want to see if they still look good after earnings. It is also possible that the price breaks above the consolidation on earnings which will provide an opportunity to get in (no gap). But we will need to wait and see how it unfolds.
In AYX, if a trade develops, I am looking for a run into $190, but a trailing stop loss will also be used.
In AVLR, if a trade develops, I am looking for a run into $115, but a trailing stop loss will also be used.
Final Word on the Watchlist
Those were a few of the stocks added to my watchlist this weekend. These were the stocks that appeared near the top of scan for stocks in uptrends. I sorted the list by yearly gains, so these stocks all occurred near the top of the list due to their recent rallies.
By Cory Mitchell, CMT, join me on Twitter @corymitc.
Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, or even more than you deposited if using leverage.