When I first started trading, I remember how much I hated weekends…

Waiting for the markets to open up again on Monday was agonizing. I couldn’t wait to start trading again.

Trading was fun, it was exciting, and I wanted to get as much practice as possible.

Back in those days, it didn’t take much to convince me to get into the next trade.

Of course, most of those trades were poorly planned. And predictably, the results weren’t all that great.

A Priceless Lesson
It took a couple of years for me to learn a priceless lesson…

Good trading is boring trading.

Your trades shouldn’t be exciting. Good trades are methodical and planned out in advance.

As you mature as a trader, you’ll find yourself simply doing the same thing over and over again.

And that brings us to a trade I put on your radar back on January 24 in XHB, a homebuilders ETF.

Regular readers will know a key part of my trading plan is to look for trend continuation setups.

These setups are the highest probability setups you’ll ever find.

They occur after a market has made a strong directional move. After such a strong move, the market will often pullback or base in a sideways fashion.

It’s these pullbacks and bases that create these continuation setups.

In the case of XHB, that’s exactly what happened.

XHB had a strong upwards move from October 25, 2023, to December 15, 2023

After this move completed, XHB traded sideways in a basing pattern which broke out on February 8.

This base was the trend continuation setup I called out on January 24.

And sure enough, following that February 8 breakout, XHB has traded higher once more.

You can check out this sequence on the chart below.

Now, it’s time to lock in some gains on this trade.

Risk Management
XHB is showing signs of being very overbought. But this doesn’t mean that XHB can’t go any higher.

So what we want to do in a situation like this is use a trailing stop loss.

A trailing stop loss allows us to lock in a gain while ensuring we can still stay in the trade if the market decides to keep going up.

My suggestion would be to place a stop loss order just below the March 1 daily low of $102.56.

So long as XHB keeps trading above $102.56, you’ll remain in the trade. And of course, we can trail the stop loss higher if the stock trades higher.

On the other hand, if the trailing stop loss is breached, you’ll still walk away with a nice gain if you bought the breakout like I suggested on January 24.

Happy trading,

Imre Gams

Source: Jeff Clark Trader