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Archive for February, 2015

Update – TROW

Posted by mounddweller on February 3, 2015

Fellow Traders,

I closed my Bollinger Band (BB) trade in TROW in just one day.  You’ll recall yesterday I posted that I bought TROW at $79.10.  Today the market was up big, the DOW was up over 300 points.  Consequently, TROW hit my first target price of $81.00.  I closed my position right before the end of the trading session, selling TROW at $81.15.  Doing so gave me a one-day ROIC of 2.37%.

It is likely that I left money on the table so to speak.  I only had the trade open one day and the stock closed today near its daily high.  Thus, I wouldn’t be surprised if it runs a bit higher.  However, with the market volatility we’ve seen lately it could just as easily give it all back tomorrow.  So, I decided to pocket the very short term gain and move on to the next trade.

Regards,

Troy

 

 

 

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New Trade – TROW

Posted by mounddweller on February 2, 2015

Fellow Traders,

I have a new trade to tell you about.  I know, I know two in one month what am I thinking (ha ha).  However, this is not my typical naked put or covered call trade.  This is a straight, go long, buy stock trade in T. Rowe Price Group (TROW).  For those of you who follow Teddi at http://www.fullyinformed.com you’ll recognize this as what she calls a Bollinger Bands trade.

Below is a 3 month chart for TROW.

BLOG - TROW 3-mnth 020215

The blue lines are the Bollinger Bands (BB).  The BBs provide a range of expected price action for a stock.  Wide BBs are a function of high volatility while narrow BBs indicate low volatility.  Stocks generally stay within their BBs.  Movement outside the BBs indicate extreme enthusiasm or pessimism by traders in a stock.  Stocks trading above or below their BBs will usually act like a coiled spring and move rapidly up or down back into the BB envelope.

The strategy behind a BB trade is to buy the stock after it reverses course and moves back up and away from the lower BB and then sell it once momentum begins to wane or begins to fall.

Today I bought TROW at $79.10.  In looking at the chart you can see TROW (like most stocks) fell most of last week.  On Wednesday, January 28 it closed down touching the lower BB.  Thursday, it traded significantly above and below the lower BB but ended up closing right on it.  Friday, was another big down day but TROW managed to eke out a gain and again closed on the lower BB.  Today, TROW opened higher making this a good set-up for a BB trade.

My target for this trade is to sell TROW at $81 or better.  Because the market is kind of shaky right now I’m going to set a tight stop-loss on this trade.  If at any point TROW dips to $78 I’ll sell.  I’ll also sell if TROW begins to lose momentum and closes below the opening price of the prior trading day.

If you’re a member of Teddi’s site and would like to learn more about the BB strategy you can read about it here: http://www.fullyinformed.com/members/the-bollinger-bands-strategy-for-big-profits/.

Regards,

Troy

 

 

 

 

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