On July 11 the recommendation was to go 50% long Macy’s Inc. (M) at $32.44 and 50% long at $31.46, with a stop at $29.58 (risk of approx. 7.4%). Since Macy’s was still declining I felt as though a wider stop was needed so it was placed under $30 and the 61.8% support. This was a higher risk than I normally like to take on any one position.
The low was made the following day at $32.31 (point 1) and just six days later the stock had moved above the prior high suggesting a short-term low was in place. After a pullback on July 24 (point 2), the stop was raised the following day to $32.18, which was about 0.5% under the previous low. On August 7 (point 3), just before Macy’s reported earnings and with prices apparently stalled below the 61.8% retracement resistance, I recommended selling half the position.
As I noted in an my article Fibonacci entries and exits “I felt comfortable taking a quick 14.6% profit, as the overall market was not looking that strong and an earnings downdraft can never be ruled out. If the technical readings for the overall market had been stronger I would have been more likely to hold on to the entire long position.”
Half of the position was closed out at $37.20 and the earnings were strong as the stock rallied to a high of $40.80 on August 30. Prices reversed from the highs and on September 13 ( point 4), I raised the stop on the remaining position to $38.26, which was hit three days later, point 5. Macy’s Inc. (M) eventually had a correction low of $36.94 on September 28, and these lows have not yet been broken.
In early November I recommended three oil stocks and one ETF in Pumped Up Oil Stocks. One of the stocks was Valero Energy Corp. (VLO) as I recommended going 50% long at $29.68 and 50% long at $29.14 with a stop at $27.68 (risk of approx. 5.8%). VLO had closed the day before at $30.06
VLO had been trading just above and just below the 38.2% support level with the lowest low at $27.89 and the 50% retracement support at $27.19. The relative performance had turned positive and the chart showed an apparent flag formation or a continuation pattern, which is one of my favorite setups.
Even though I was looking for pullback, I felt that the risk was too high using a stop under the 50% support. A stop at $26.92 would have increased the approximate risk to 8.4% from 5.8%. Both buy levels were hit over the next two days as VLO had a low of $28.56 on November 15 as the stock market was making its low.
I was looking for a convincing move above the four-week high at $30.57 to indicate that the correction was over. This occurred when the downtrend, line a, was overcome on November 23. The stop has now been raised to $28.38, which is just below the November 15 low.
Once the last significant swing high at $33.44 is overcome I plan on raising the stop to break even or higher. VLO has a yearly high at $34.35 with the 127.2% Fibonacci retracement target at $36.15. I therefore will be looking to sell half of the position at around $35.90 for about a 22% profit. Of course if there are any signs of a reversal at the $34 level, a more defensive approach will be implemented.
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