How to Develop a Trading MethodYou don’t have to develop your own methods but never just depend on learning somebody else's method as if all you had to do was follow instructions. You need to understand and make it your own. Even if you don’t want to design your methods, approach this as a learning exercise.
Let's structure how to go about developing a method. First start with a bassline and then work your way through the process.
1. Start with a repeatable market structure pattern. You can also use an indicator, trendline or whatever it is you relate to and can see
2. Understand the essence of your pattern and use this as a bassline to develop from
3. Structure objective trade rules around that pattern. How are you going to enter, place a stop, manage trade, and exit
4. Test it and learn.
Shane
BLDR trade ideas
BLDR on a consistent trend higherBLDR is part of the construction industry and has had consistent gains over YTD in the range
of 95 % with favorable beats on earnings estimates and increases in revenue. Volume has been
rising in the past month. In the past when BLDR pulled back to the blue SMA100 line it then
reversed quite well and resumed its move higher. At present, BLDR is on a pullback which
provides an opportunity for a long entry at the current price where the SMA20 SMA50 and SMA
100 are converged. I will take a long trade here as I see BLDR to be consistent in its move
up and setup for entry with a pullback.
BLDR (Long) - lovely chart, lovely fundamentalsFundamentals
Builders FirstSource is in a robust financial situation and very cheaply valued (P/E = 4.6, P/S = 0.6)
Since the start of 2011, its revenue has tripled and earnings grew by almost 900%! Even last year when the market was puking, its earning grew by 60%
Their profitability is also good with ROE = 55.4% (Industry = 17.9%) and net profit margins at 12.5%
The stock is very much tied to the housing sector (which is also the main caveat), so if the housing market were to absolutely fall off the cliff (which is not completely unlikely), the stock would suffer. However, estimates already show BLDR's earnings falling in the next two years (meaning they have already been priced) and the stock is still rising, suggesting a lot of internal strength
Additionally, the managers announced a share buyback program and we might see them buying 10% of the public shares by the end of 2023, which would serve as a strong tailwind for the stock price
However, be mindful of the housing market (I suggest watching the chart of house builders - ticker: XHB)
Technicals
Technicals look like from a textbook
On a weekly we can see a massive rounding base , suggesting a long-term accumulation; the break was not the cleanest, but the price action of the last few days suggest a follow-through in price
Relative strength to the overall industry is also pretty impressive and the stock clearly outperforms the rest of its industry
Trade
The stock has gone a bit further from the breakout point , but it pulled back today and it is yet not too far as for it to be unprofitable to enter
As a stop-loss , I would use the most recent low on a daily
The stock seems very suitable for a short-term trade as well as a longer term investment
As i mentioned before, be mindful of the housing market and commodity prices (lumber, copper etc.). The stock is correlated to both
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BLDR GOING LONGBLDR has pulled back to the 163/164 mark. The last two time it did this it bounced back and hit the 72-75 range and relatively quick.
The MACD has it in a downtrend for now but I think if you can get this stock @ the 60-63 range you will be in great shape for a decent return in a few months. RSI has it on the oversold side slightly, the PE ratio is also at a 7.61 which is pretty decent value for the stock.
My 1 year prediction is that this stock will hit $100.
I would watch out for this stock to see how much it pulls back, its under the 50/100/200 MA as far as looking at a 1 day candle stick chart. so its defiantly in a down trend.
Also for options traders this stock has low premiums for its price. April 14th is the next exp. date.
Good luck to all traders out there all comments are welcome!
Thanks,
ATX
2/21/22 BLDRBuilders FirstSource, Inc. ( NYSE:BLDR )
Sector: Producer Manufacturing (Building Products)
Market Capitalization: $13.734B
Current Price: $71.72
Breakdown price: $67.00
Sell Zone (Top/Bottom Range): $68.50-$73.00
Price Target: $64.20-63.00 (2nd), $56.00-$54.40 (3rd)
Estimated Duration to Target: 27-29d (2nd), 60-63d (3rd)
Contract of Interest: $BLDR 3/18/22 70p, 5/20/22 70p
Trade price as of publish date: $3.40/contract, $6.30/contract
11/7/21 BLDRBuilders FirstSource, Inc. ( NYSE:BLDR )
Sector: Producer Manufacturing (Building Products)
Current Price: $67.28
Breakout price trigger: $63.00 (hold above)
Buy Zone (Top/Bottom Range): $64.75-$59.20
Price Target: $78.00-$80.00 (1st)
Estimated Duration to Target: 67-70d (1st)
Contract of Interest: $BLDR 1/21/70 70c
Trade price as of publish date: $3.20/contract
$Bldr, Real time high probability trade for swing trading$Bldr, This stock is fundamentally strong and by volume we can see that there is interest form big players in the stock. Stock is trading at it's all time high and only potential we see in this stock is that the stock should rally up in price, worth putting this stock in your watchlist. Volume need to be highly considered as we enter the at any certain point we need to see relative volume to the price at execution (Volume Explains Demand). this stock can be traded in the daily, hourly
chart or any intraday time frames according to your trading style. also this stock can be traded at any potential price structure depending on the time frame.
Tips :
*Make use of exponential moving average of 5 & 10 period in the daily
*Add relative Strength (Benchmark S&P500)
*highly recommended for swing trading
BLDR - LongI believe we are about to see a Cup & Handle formation here.
RSI is high (overbought) currently, therefore price may price may come back down to the SMA lines. This will result in bringing the RSI back down to an appropriate level. Once the price meets the SMA lines, it will use them as support to continue to rise - completing the Cup & Handle formation. Thereafter, it will be all time highs for $BLDR.
Along with strong showings in Earnings last week, the current Real Estate cycle, and many other factors - I believe this stock looks good on the chart & on the paper.
Long.