Scott Redler: What Is a “Special” Stock?

FYI - I discussed the broader market action with CNBC yesterday. Click here to read the article.

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If you follow me, then you probably know I have my own trading language.

It's easy to understand once you get the hang of it, but I sometimes get questions about on particular term I use: 'special'

As in, there are special stocks and not-so-special stocks. 

So what is a special stock?

To me, a special stock is trending above the 8 & 21 day moving average (or an earnings gap) and showing relative strength vs. its sector and the market.

These are the names I want as swing longs. 

I typically start them as Tier 1 positions (which is essentially a foothold), so I can add when these names break to near-term or all-time highs.

(I discuss the Tier System in the Path to Profits program)

This is a daily chart of Diebold (DBD), one of my picks from the 2019 Market Outlook Report:

As you can see, it held the 8, 21, and 50 day to start the year.

Then it gapped up big on earnings and reclaimed the 200 day moving average. Then it held the gap and didn't fill it at all.

This is 'special' behavior because it held the moving average, then held post-earnings highs with no trouble whatsoever.

So what does a 'not-so-special' stock look like?

Well, Lyft (LYFT) is a good example. It hasn't been able to hold a high, and it's below its brand-new 8 & 21 day moving averages.

And Apple (AAPL) recently lost special status when it couldn't hold its post-earnings gap.

Want to learn more about my system? Check out Path to Profits.

Positions Disclosure: As of May 8, 2019 at 10:49 a.m. ET, Scott J. Redler was long TWTR, PSN, BABA, TWTR calls, AMRN calls, BRKB calls