Momentum Based Swing Trade: AMED

The vertical black line shows where I bought AMED at open on February 11th, 2015.

I’ve mentioned in previous posts that I’ve gotten into some momentum-anticipation set ups that haven’t gone well, and I was frustrated because I didn’t really have a tested system. I follow the Stockbee site but Pradeep Bonde doesn’t simply issue buy/sell triggers for you to blindly invest with (and wisely so). After flying by the seat of my pants on a couple of trades and getting burned on one of them, I set out to get a system for momentum burst swing trades that I could actually backtest with AmiBroker.

Unfortunately I found a system that would make someone with a lot of money a whole lot richer. But it all fell apart when using smaller position sizes like I do. I discovered this bug in my system too late (discussed here), and had already invested in Amedsys Inc (AMED).

So what to do? I went back and corrected my position sizes for testing, and I haven’t quite come up with a new system that works for po’ folk like me. But I feel like I’m close. But what to do about AMED? The stock was still in its low-momentum stage, and I’d bought when it pipped up to a predetermined buy-stop and then settled back down. It might burst at any moment. But also the company had an earnings report due on March 4th 2015…tomorrow as it turns out.

So I threw up my arms metaphorically speaking and decided a 5% stop and a 8% profit margin, sell on the following open if either point was hit, but for chrissake get the hell out before the earnings announcement! Betting on earnings reports is one way to speculate, but it’s best not to mix and match your systems.

Fortunately I got the little bump I’d hoped for. It didn’t hit my sell threshold before reaching my exit-date stop, but it did give me a decent increase before exiting.

As it stands, I made 6.66% on this trade before commissions. Sweet! And since that’s the number of the beast, it’s probably best I didn’t sit through the earnings announcement.

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