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Right Stock – Wrong Time. Why This Stock Deserved A Second Chance

There were a lot of cases of right stock, wrong time in September. LAC stock was one example. But if you let a swing trading loss prevent you from trying again, you can miss out on many opportunities.




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Swing Trading Example: LAC Stock

With more players entering the electric-vehicle market, the demand for lithium is also increasing along with battery technology. With production projects in Nevada and Argentina, Lithium Americas (LAC) is looking to establish a source in the Americas. The accompanying video shares some insights from Pedro Palandrani, a research analyst at Global X ETFs.

LAC stock joined SwingTrader on Sept. 27 on a big outside day (1). The risk was larger due to the big move, and so rather than skip the trade we went with a half-position size. Unfortunately, it didn’t work. We exited the next day (2) with a loss of roughly 3.7%. Considering it was just a half position, that’s not a big hit.

There was some bouncing around after that. LAC stock undercut the lows of our entry, quickly rebounded for one day (3), and then went even lower over the next week (4). The Nasdaq composite traded below its 50-day moving average line during this period, while LAC stock remained above its 50-day line.

On Oct. 11, Lithium Americas rebounded back to our previous entry and looked like it was breaking a downtrend line (5). We waited a little extra time for it to be more decisive and get above the previous highs where it met resistance.

A Second Try Pays Off

A decisive move in LAC stock came the next day, and we put it back on SwingTrader (6). Volume increased on the day and the relative strength line moved to recent high territory. However, we had a similar issue with a larger risk percentage and went with the half position again.

This move also came a couple of days before the follow-through day in the Nasdaq. The variety of names that showed constructive setups, strong relative strength, and positive price and volume characteristics convinced us to try a few ideas ahead of the follow-through day.

We still stuck to our rules and started taking profits once we had a 3.5% gain (7).

Selling Into Strength

Because we started with just a half position, our intention was to let the remainder of the LAC stock position run. On the follow-through day, LAC stock started strong but finished weak (8). With a market filled with sector rotation, this made us a little nervous. Why didn’t LAC stock participate better on a strong market day?

Then another downside reversal happened with a wider spread from the high to the low (9). The gain from our entry in LAC stock reached over 18% at the peak, but fell 7% from the highs by the end of the day. We still had a 10% gain from our entry so we booked the remaining profit in LAC stock. Often that wide a move requires some recovery time. While Lithium Americas did make some small moves higher, it stayed well below its peak and eventually undercut the lows of the downside reversal on Friday. This could be a shakeout, but with our profits booked we can watch on the sidelines and see if LAC stock offers another opportunity.

More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on Twitter at @IBD_JNielsen.

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