Since swing trading relies heavily on technical analysis. Being aware of areas of resistance as well as market strength is imperative. For GE Vernova (GEV), our sell decisions relied on this combination to lock in a quick profit while we had it.
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Swing Trading Example: GE Vernova Stock
When the General Electric conglomerate split into three separate stocks earlier this year, it seemed to unlock a lot of value in the components. A case where the sum of the parts was greater than the whole. It was probably most apparent in GE Vernova, the energy component, that basically tripled in value since the spinoff at its peak (1).
After such a move, a consolidation is certainly in order. Indeed, it can be a constructive part of a stock’s life cycle. The pause for a base can build a platform for a launch to new highs. But it often entails a number of false starts and patience.
Over a month’s time, multiple attempts to overtake 350 quickly failed (2). On one of the bounces from the 21-day line, we did add GE Vernova to SwingTrader (3) only to be knocked out of it when it dropped the next day (4).
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However, as mentioned multiple times in this column, just because a trade doesn’t work out that shouldn’t prevent you from trying again.
First Mover Advantage
When GE Vernova fell to its 50-day moving average line (5), two things happened. First, gratitude that we had the discipline to exit our position at a higher price before things got worse. Second, a reason to observe closely to see if there was a bounce.
We started a new trade in GE Vernova as the stock bounced strongly above the highs of the previous day (6). Notably, GEV was also showing relative strength versus the leading index, the Nasdaq composite and we added to the position later in the day once we had 1% progress.
It wasn’t until the next day that the Nasdaq showed an upside reversal that caused us to increase exposure in the model portfolio in a big way. GE Vernova was a first mover, and first movers often can provide the largest gains.
Look To The Left
When looking for reasons to exit a position, a look to the left can often tell you a lot. Because of that earlier resistance at 350, we took the opportunity to trim some of our gains once we got there (7). We trimmed the remainder the next day after GE Vernova fell more from the resistance area (8). But that wasn’t the only reason for the exit.
The Nasdaq composite also didn’t have as much follow-up to the strength we saw earlier in the week. So we started scaling back on a lot of positions. GE Vernova had two pain points that led to the booking of profit — the action in the Nasdaq as well as the stock itself.
While it might have seemed strange at the time, the action on Friday (9) made the profit look much better in hindsight. Selling into strength once again helped reduce our drawdown.
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.
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