Normally with swing trading we measure our holding time in days or weeks. But in some instances, the holding time can extend to months. That was the case for a recent swing trade in SharkNinja. What decides how long you hold? Often it's a combination of the stock and the market environment.
An Earnings Pop And Pause For SharkNinja
Strong moves are worth watching. SharkNinja blasted through a flat-base buy point on a 17% gap-up on its last earnings report (1). The strong move launched its relative strength line to new highs along with the price. IBD's Leaderboard had an earnings option position that put it up nicely for the day. But what if you didn't have any exposure? Rather than chase a stock on a gap-up, we often prefer to wait to see how it handles itself over the next week or so.
SharkNinja gapped up again the next day (2) but then hardly gave up any ground over the next couple of weeks. After a three-day drift lower and an upside reversal, we initiated a half position on SwingTrader (3).
Using the low of the entry day as a stop was a little tight, just 1.6%. Instead, we used the low of Aug. 9 since that contained the move (2).
SharkNinja had another drift down of three days followed by another upside reversal (4). We used the opportunity to add a quarter position once we had a roughly 1% gain. Once the stock cleared resistance above 92, we rounded out the position with another quarter add (5).
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It's important that each buy was at a higher level. We don't average down. Also, we go with fewer shares at the higher prices. That helps avoid spiking your average cost up too much. The end result was that after three purchases we had a full position and an average cost around 91, less than 1% away from our initial entry.
Locking In Gains While You Have Them
As SharkNinja moved higher, it acted in an orderly fashion finding support at its 10-day moving average line along the way. Still, we started locking in some profits on a quarter of the position after a nearly 15% gain from our initial entry (6).
After pausing and dropping slightly, we took off another quarter (7) and then one more quarter after it popped to new highs (8). With our position down to a quarter size and a lot of cushion, we could give the remainder some room before we decided to lock in the final profit.
But after a one-week pause we decided to add back a quarter after the stock gapped up to new highs again (9). Yes we were adding at a higher price than our last sell, but it was a small amount so still had plenty of cushion from our average cost.
A Final Exit
Once SharkNinja seemed to have trouble around 110, we exited the remaining position a quarter at a time. We started with our recent add while it was still up (10) and then exited the remainder on the day it closed below its 10-day line for the first time since our entry (11). The nine-week trade was on the longer side but a 12% gain on a full position size gives you enough of a portfolio boost to make it worth the wait.
More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on X, formerly known as Twitter, at @IBD_JNielsen.
