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Ask The Trader
Wednesday, December 13, 2000

Let's Review A Recent Play Pick


What caught your eye when you picked up Quest Diagnostics?


Reviewing the original reasons for picking a particular stock is an effective way to hone your trading skills. Just recently, we added Quest Diagnostics (DGX) to our Current Play list. To be sure, the stock has cooperated for us, but let's see what the main factors were that attracted us to this play.

The vertical dashed line on the chart below marks the day that we chose DGX for a play. There were four factors that came together on that day to attract us to the stock. First, in the three days prior to 11/24 (our pick day) the stock tested support at $98 and held, confirming the stock's strength. Second, the MACD had just issued a buy signal. Third, Quest's stochastic was coming off over sold levels and was trending higher. Lastly, on 11/24 Quest broke through and held above its 5-dma. This was significant because the 5-dma had provided support for three of the last four previous rallies in the stock.

As illustrated above, the more supporting factors that you have to back up the reason for entering a trade, the better. Although, there is a fine line between trying to come up with too many supporting factors (and never getting into a trade) and pulling the trigger on the first signs of a possible up turn in a stock.

Good Luck and Have a Profitable Trading Day

Craig Seidler
Assistant Editor

 


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