Anatomy of a Great Trade: Riding the ROKU Wave

by | Nov 17, 2023

Every trader dreams of catching a big win on a hot, new, high-flying stock.

There are several problems with that, of course.

One is finding a hot, new company. Although it’s not as hard as we might think.

Another is figuring out when to enter.

And a huge problem is when to get out. 

Most monster wins are ruined by getting out too early or too late.

But a system solves all that.

And a long-term system solves it in a very non-frantic way.

An example of this is ROKU.

Back in 2020, everyone was staying home. Could we have possibly picked a stock that might benefit from that?

How about a company that helps us watch TV? That seems smart. And ROKU was a reasonable pick.

How do we get in? 

In July 2020, ROKU closed above its 30-week simple moving average (SMA) five weeks in a row. 

So, we could’ve entered there.

How do we get out?

n May 2021, ROKU closed below the SMA for the first time. We could have exited there.

If we did that, how would we have done?

We would’ve hypothetically had a big winner, entering at $148 and exiting at $309.

And as you can see, that big winner could have possibly been even bigger.

Using common sense and having a long-term system can lead to some great trades.

ROKU showed us that.

Happy trading,

— Scott Welsh

P.S. As a reminder, these plays are based on my longer-term Weinstein Stage Analysis method. The chart above uses weekly candles and a 30 week simple moving average. For details on this method, see my explanation on this Ask The Pros episode starting at timestamp 20:45.

Additionally, the teal lines on the chart show the profitable runs.

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