Navigating the Market: Insights on Swing Trading
October proved challenging for swing trading, and November is not off to a promising start either. Many traders are witnessing a scarcity of winning trades, often relying on swift profit-taking to secure gains. A prime example of this is MongoDB (MDB).
MongoDB’s Market Journey
While numerous leading stocks have been rising since a pivotal follow-through day on April 22, MongoDB initially lagged behind. After spending a significant part of the year trapped below its 200-day moving average, MDB broke free following its impressive earnings report at the end of August. This move not only established a nearly 40% gap-up but also allowed the stock to gain over 15% in the subsequent weeks, signaling strong investor confidence in its elevated valuation.
The following six weeks saw MDB consolidate into a flat base with a modest 11% depth. During this period, the stock allowed its 21-day moving average to catch up while moving sideways. After testing its potential buy point again, MDB experienced a slight pullback before executing an upward reversal.
Strategic Positioning
As the stock demonstrated strength with its breakout from the flat base, it was added to the trading portfolio as a half-position. This decision was reinforced by the relative strength line hitting new highs, further confirming MDB’s bullish momentum.
When MDB continued its upward trajectory, it was increased to a full position. However, as November approached, the promising start for stocks quickly waned, resulting in a downside reversal for many. Despite this, quick profit-taking earlier in the week allowed us to secure some gains.
When the market faced a downturn on Tuesday, MDB managed to hold its position better than many indexes, which performed poorly. However, as MDB began to breach its recent lows, we prudently decided to exit the remaining position. Ultimately, we ended with a profit, a modest 2.3% gain, which was a welcome achievement in a week characterized by choppy markets.
While hindsight may suggest that holding on after Friday’s upside reversal would have been beneficial, it’s crucial to consider the unpredictable nature of trading. Cutting losses promptly can safeguard capital for future opportunities, allowing traders to stay in the game rather than risk a more substantial loss.
Final Thoughts
In volatile markets, maintaining a disciplined approach is essential. Whether you’re navigating through profits or losses, ensuring you have the flexibility to adapt is key for long-term success. For those seeking to enhance their trading acumen, focusing on sound strategies and maintaining an agile mindset can pave the way for future opportunities.
