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TRADING SYSTEMS


Oneok's New RMO Buy Signal

04/05/11 08:05:51 AM
by Donald W. Pendergast, Jr.

Buying a stock after a strong move up might seem illogical, but sometimes it still pays to buy high, sell higher.

Security:   OKE
Position:   N/A

Oneok (OKE) has risen by more than 250% since the major March 2009 lows, and for all we know, it may decide to tack on even more gains before a late spring correction occurs. Here's a look at the latest RMO swing buy signal for this stock (see Figure 1).


FIGURE 1: OKE, DAILY. Buy high, sell higher? Sometimes this really is the best pathway to profits, particularly in a strong relative strength stock with a compelling buy signal. Limiting risk with an initial and/or trailing stop and modest position sizing can also help a trader stay with the trade through final closeout.
Graphic provided by: MetaStock.
Graphic provided by: Rahul Mohindar RMO indicator from MetaStock 11.
 
First off, this is not a good covered-call candidate, as the bid-ask spreads are very poor for OKE options. However, since we're still dealing with a stock that has excellent 13-week relative strength versus the broad market (the .SPX), that fresh RMO (Rahul Mohindar oscillator) swing buy signal still might be of special interest to short-term swing traders. The stock has above average long-term Chaikin money flow (CMF)(100), which is also another attractive feature for speculative longs at this juncture.

Managing a trade entry ought to be a pretty simple affair. For example, you might consider going long a couple of ticks above Monday's high ($67.59) and then trailing the remainder of the move (if there is further upside) with a two- to three-bar trailing stop of the daily lows until the final stop.


Modest position sizing can also help minimize the damage to your account, should the stock turn south soon after you purchase it; risking no more than 1% of your cash equity in your stock trading account might be one way to do this. In trading, just as in pro sports, putting up a good defense should always be viewed as job #1.



Donald W. Pendergast, Jr.

Donald W. Pendergast is a financial markets consultant who offers specialized services to stock brokers and high net worth individuals who seek a better bottom line for their portfolios.

Title: Writer, market consultant
Company: Linear Trading Systems LLC
Jacksonville, FL 32217
Phone # for sales: 904-239-9564
E-mail address: lineartradingsys@gmail.com

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