It's Not Too Late to Jump In

 | Mar 16, 2012 | 10:00 AM EDT
  • Comment
  • Print Print
  • Print
Stock quotes in this article:






This column from ETF Profits is being posted here as a bonus for Real Money readers. For a trial of ETF Profitsclick here.

The last trade setup I had on the daily chart of Wynn Resorts (WYNN) -- a big component in Market Vectors Gaming ETF (BJK) and Guggenheim S&P 500 Pure Growth (RPG) -- was a relatively simple "symmetry" setup, or a similarity or equality of swings in the same direction. For my trading purposes, I use symmetry projections to get into a stock in the direction of its current trend.

In the case of Wynn, a prior decline took place from the Jan. 26 high to the Feb. 14 low -- a swing of $14.09 -- and the symmetry, or 100% projection, of that decline came in at $118.50. That level overlapped a 0.618 Fibonacci retracement of the Feb. 14 low to the March 2 high, which came in at $118.12.  With these price relationships, I created a zone to watch for possible support and a buy entry: the $118.12-to-$118.50 area. The actual low came in March 6 at $118.60, which was close enough to that zone. Note that the second decline measured at $13.99, as well, which is very similar to the prior swing of $14.09.

Wynn Resorts (WYNN) -- Daily
Source: Dynamic Trader

Using the more aggressive entry for a swing trade, it looks like the worst price for a buy entry would have been around $122.65. You could have also bought on a pullback after the initial trigger at lower prices, when Wynn shares pulled back to $120.09 before resuming the rally above the $118.60 swing low. That $118.60 level defined the initial risk on this trade setup.

I like to use options for a trade entry, and knowing what your potential target is on these setups will help you choose the options strikes for the trade. In this case, once I'd defined the $118.60 low as pivotal, I calculated the potential upside target at $136.40. I calculated that target by running the 1.272 Fibonacci price extension of the March 2 high to the March 6 low (again, at $118.60).

If you are OK with risking more, you can buy an outright call at the money. If you want to risk less, you can consider a vertical spread either at the money, or even out of the money, since we expected a move to $136. I am no expert on options, but at least I can use the simple strategies! So far we have seen a $10.23 rally from the March 6 low.

Also note that there was a timing parameter on March 5, plus or minus one day, for a possible change in trend date. Fibonacci timing is a subject I will discuss more in another article, but the low was made on March 5 -- which was one day before the cycles came due. In short, so what if you missed the first buy entry in Wynn Resorts? Since the upside target has not been met, you can now look at a pullback on an intraday chart for a possible entry.

Wynn Resorts (WYNN) -- 15-Minute
Source: Dynamic Trader

If I were not already in this stock via options, I'd currently be looking at a pullback on a 15-minute chart for an entry. The area to watch now comes in between $122.51 and $124.66. If this area is tested and holds, I will look for another buy trigger to fire off and then define my risk below the $120.09 swing low. It's perfectly fine to be a little late to the party if there is still some fun to be had!

Columnist Conversations

volatility is quite low here, and we could see some downsides here in the short term. ...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.