I am slowly moving away from day trading to swing trading or trend trading, since my daily job does not allow me to follow positions throughout the day. That is why I am working on a strategy which requires me to take a look at the positions after the closing bell. I am not moving away from technical analysis though, but I am increasing the significance of fundamental data. The strategy will follow William O´neill´s strategy and Michael Voigt´s represented "market technique". From this point on I will try to find an interesting stock every week and maybe trade it. I will write a short blog entry about it so that I can in the future look back how my recommended stocks performed. The markets are not good at the moment so I doubt they perform in the near future well.
Dycom Industries Inc. (DY)
Dycom’s business primarily benefits from
increased demand for network bandwidth and mobile broadband, given the
proliferation of smart phones. The company has been continuously benefiting
from extensive deployment of 1-Gigabyte wireline networks by major customers.
Most of the telecommunication companies are deploying fiber-to-the-home and
fiber-to-the-node technologies to enable video offerings and 1-gigabit
high-speed connections, thereby opening up significant opportunities for Dycom.
As the picture below shows, the company´s quarterly and annual numbers
look promising. The stock has also a 89% institutional ownership and it´s stock
is ranked number one among the competitors according to IBD ( Investors
Business Daily).
The only problem my strategy is facing with this stock is the risk/ reward ratio. Assuming the stock would increase in value by 50% and having a price of 94,98$ the stop order at 46,61$ we get a ratio of 54%. Also considering the order costs, I am risking 46% more than my theoretical profit could be. A good ratio would be above 100%. That is why I am only watching this stock. Maybe the price will form a new bottom soon, so could set the sell stop order on a more reasonable level.
