Monday, November 22, 2010

URBN Watch

Urban Outfitters Inc. (URBN) was a last-minute earnings play that turned out to be a success (see my prior post). The price hit a swing high today of $37.92, which works out to 15.8% above the pre-earnings close.

ppspsarmacd obvh-a trend ma20ma50ma200

A nice ride five trading days. However, there are signs of weakness in the chart, and it may be that the ride is about over.

  • The price has been trading more or less sideways for four trading days.
  • The stock pulled back to within that four-day range after making a swing high late Friday.
  • The macd for the first time since earnings has declined, although it remains far in bull territory.
  • The on-balance volume has moved sideways since earnings.

On the positive side, the Heikin-Ashi candlestick chart remains in an uptrend, with the candle wicks pointing up, all bullish signs.

For my own account, I tend to use tactics that give me a defined maximum gain and a defined loss, using complex stock options structures. In this case, I've gained 83% of my maximum, and my rule of thumb is that anything over 80% may mean that it's time to exit.

There's also the question of price change motivation.

I once worked for a bureau chief in the AP Washington bureau who, whenever I floated an absolutely brilliant proposal, would look at me with a skeptical eye and say, "Why do this?"

That's a question every competent trader asks when examining a position. Good traders don't risk their money without having a good reason for doing so. Stock prices tend to drift unless they receive an outside impetus that answers the question, "Why do this?"

It's my experience that outside of earnings, most of the impetuses tend to be negative, and also totally unforeseeable.

The next earnings announcement for URBN is a long time away, not until February most likely. There's no reason for maintaining exposure to possible unforeseeable surprises.

So I'm looking for an exit, so I can move on to the next trade.

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

  • h-a trend - Heikin-Ashi trend.
  • obv - On-Balance Volume.
  • pps - Person's Proprietary Signal.
  • psar - Parabolic Stop and Reverse
  • ma20 - 20-day moving average
  • ma50 - 50-day moving average
  • ma200 - 200-day moving average
  • macd - Moving Average Convergence-Divergence

About the glance: The colors indicate the state of each signal.
  • Signal Section:
    • pps, psar, macd: green for bull mode, red for bear.
  • Confirmation Section:
    • obv: green for uptrending, red for downtrending.
    • h-a trend: green for uptrending, red for downtrending.
  • Environment Section:
    • ma20, ma50, ma200: green for above the average, red for below the average.

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