Sunday, February 12, 2012
February 12, 2012 - (WYN)
Stock Name: WYN
Wyndham Worldwide Corporation
How I Trade WYN: Wyndham is what I call a "Bouncing Stock". This is one of the most beautiful charts and easiest to trade because of how consistent the pattern is. The white line in the picture is called a trend line. You can draw them on any stock in order to see many things, but mainly the general direction of the stock. In this case, the trend line is below the closing stock prices and tracks the lows of each bounce.
My Buy Signal: Every low point that touches the trend line is a Buy Point for trading this type of stock. For example, November 28th at $33.00 was a bounce, so was December 15th at $35.00 and January 5th at 37.50.
My Sell Signal: When WYN's stock price closes for the day BELOW the trend line.
Another example of the "Bouncing Stock" is Netflix from the last two years:
There are two ways to trade a stock that moves the way NFLX does above. One is to go with the trendline. I drew two separate bounce lines that show about 7 buy points. The other way is to trade based on bounces along a moving average. In the case of NFLX, you would much rather trade along the moving averages, more specifically the 30-day MA (Blue Line). Almost 90% of the distinctive low points touched the 30-day MA.