One of my favorite strategies was inspired by a line from Oscar Wilde, ‘We are all in the gutter but some of us are looking at the stars’. It's a weekly trend following strategy where we are looking for high flying stocks who have fallen out of favor and ended up in the gutter.
As the management (or what’s left of them) go about the job of restructuring, the share price finds a bottom and begins to form a base. Over time, resistance and support levels define the width of the gutter. If the firm can be restructured, eventually the stock will burst out of the gutter and reach for the stars. That's when the Wilde Strategy kicks in.
Once we are in a position, we stay with it until the newly formed trend comes to an end. We can use an ATR based trailing stop to manage our risk and get us out when the time is right, with our profits intact.
DISCLAIMERContent is provided for information and education only and is not a recommendation to trade. Trading is not suitable for everyone and involves the risk of losing money. Past performance is not a reliable guide to future returns.