Love It When a Plan Comes Together

 | Nov 08, 2013 | 1:00 AM EST
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With thousands of stocks to review on a daily basis, I use certain indicators to alert me for opportunities.

One of my indicators is my 3-Day Rule, which provides clients entry and exit levels over a three-day period.

  • Day-1 Rule : If stock trades inside my buying zone, then I'll look to trade 25% of the position.

With Whole Foods (WFM), yesterday was Day 1 of our rule, with the stock falling 11% and inside the buying zone ($58.30-56.57).

Based on this rule, clients would be long 25% of the position with an average price of $57.70 .

WFM closed lower than our average price, but these trades are not for the short-term trader as most take three days to get in or out.

  • Day-2 Rule: Watch for a higher low and still inside the buying zone before adding to the position.

It is Day 2 today and WFM got a downgrade. I love it when a plan comes together, as WFM is not yet long-term oversold.

Further weakness today might get WFM to trigger a long-term oversold signal. Look to buy 25% again inside the buying zone ($58.30-56.57), but not lower than $56.57.

Tomorrow, we look for a close above the Day 1 close at $57.26 to add more to longs.

I will follow up next week on WFM and other 3-Day Rule research previous sent.

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