Even in a market correction, you can have stocks that buck the trend. Take Mosaic. It's up 15% for the year and pushed into new highs multiple times while the market struggled to find its footing. For swing trading, we've had three trades on MOS stock during that time. So why haven't we stuck with it?
Not Our First Time With MOS Stock
We haven't had many stocks on SwingTrader this year, due to market conditions, but MOS stock continues to earn its place. So far all three ventures with MOS stock profited this year.
On Dec. 22, it joined SwingTrader after poking back above its 50-day moving average line (1). We sold into strength along the way, and our final exit was on Jan. 5 as the Nasdaq composite plunged through its 50-day line (2). That netted a 2.6% gain for the trade.
MOS stock rejoined SwingTrader as it held up during market weakness (3). Again, we locked in profits along the way and ended with a 2.9% gain for the trade by our final exit (4).
These trades were the subject of a previous column on why we ditched our position in MOS stock.
Sacrificing Returns But Reducing Volatility
A few days after that column posted, the market revealed an answer. Holding positions in a weak market environment carries extra risk. In less than a week, MOS stock dropped an additional 12% from our exit (5). At its lows on Jan. 24, it was trading below our initial entry from Dec. 22. A month's worth of progress wiped out in days.
While we didn't participate in the downside, we also didn't forget about the stock. Mosaic found support at its 50-day line, and we added it again on Feb. 1 at 41.44 early in the session (6). Interestingly, that entry was below our previous entry. We locked in those gains and reentered our position at a better price. Sure, the stock might have gone higher without us. But sitting out the correction has value. It reduces the volatility of your portfolio.
Locking In Profits Again
There was also news driving the stock higher that day, as Eastern Europe threats of conflict drove up the price of potash, a key ingredient of fertilizer. That gave us a higher risk at our point of entry, and so we adjusted our position size to three-quarters of our normal full position. But it was a risk worth taking. Volume was tracking higher at our entry, and the relative strength line was soaring.
MOS stock moved higher the entire day and we took our first profit at 4% from our entry and already had a 5% gain by the close. A few days later and we had an 8% gain (7). We considered locking in another third, but we already had a reduced position and we gave the remainder room.
A few days later, we had a 10% gain from our entry and started to see a reversal (8). We decided to lock in the remainder if we came back down to our 8% profit level, and exited when it did.
Sure, the next day when it was up over 6%, it looked like a bad decision (9). But MOS stock came off its high considerably by the close and soon enough started trading below our exit again. You can't expect to sell at the very top. We locked in a solid gain and now we can wait until after earnings for another potential setup.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on Twitter at @IBD_JNielsen.
