Often with explosive stocks and leveraged sector ETFs like NUGT, pullbacks off parabolic breakouts can be volatile, and difficult to enter. So just how do we figure out our entry level?
There are two ways to do it. The safe route is to wait for a confirmation move. For instance, a positive candle pattern. The riskier route is to take a stab once the stock becomes oversold.
When choosing the later, it’s best to play it safe with a small position size or tight stop. Today NUGT presented both options. It pulled back down to $16.50, which got it to oversold levels, before reversing into what now looks like a positive candle pattern. This pattern is not valid until the close.
While it may seem counter-intuitive to enter near the highs of the day, this pattern is actually the safer route, assuming it holds to the close.
Remember, in swing trading you must have a game plan. Often times the strategic moves you must make go against what our emotions tell us, so that plan must be in place going into the day.
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P.S. We traded NUGT successfully in the Trade Report and have been stocking it since the December bottom formation.