"Water shapes its course according to the nature of the ground over which it flows; the soldier works out his victory in relation to the foe whom he is facing. Therefore, just as water retains no constant shape, so in warfare there are no constant conditions."
Sun Tzu

Friday, November 2, 2012

Why I Like MU for a Swing Trade

One of my favorite swing trades is he failed breakout. With this pattern, a lot of traders get trapped on the wrong side and have to close positions, which creates short-term momentum.

Yesterday, I traded this pattern by taking a long position in MU. Semiconductors had been acting weak for months, so stocks can rally hard once a move gets going. Micron has strong and obvious support around $5.20 as can be seen from the weekly chart:

Last week, the stock tested support and rebounded sharply. Key for this trade is the time a stock trades at or below support: if demand comes in at these levels, there should be a quick reversal. MU acted this way, which is why I bought. As usual, this is just a swing trade, so I expect price to be higher in the next one or two weeks. I do not care about the longer term perspective.

Disclosure: Covestor Model is long MU.