Banking

Early Profit-Taking Saved The Live Nation Stock Trade

As the nation gets vaccinated, more attention is turning to what the reopened economy looks like. Live Nation stock certainly looks to benefit but our swing trading attempt didn’t unfold as expected. But we still kept the trade profitable.




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Swing Trading Example: Live Nation Stock

Live Nation Entertainment (LYV) certainly took its beating in the coronavirus crash to the tune of a 72% drop. But even with concerts and live events still uncertain, Live Nation stock is already above its pre-pandemic highs.

There are a number of reasons why. Among them potential acquisitions of smaller players and pent-up demand leading to record revenues. Ultimately, our decision to add Live Nation stock to SwingTrader came down to the chart.

LYV stock was on our SwingTrader Watchlist as it pulled back to its 50-day moving average line at the end of March. It joined SwingTrader after a strong bounce from the 50-day line that turned into a big outside day (1). These upside reversals can often be the start of a strong gain back near former highs.

The relative strength line was on the weaker side at the time but looked like it could quickly break its downtrend as well.

Live Nation stock followed up nicely the next day but its close was weak (2). Over the next couple days, it pulled back to its 50-day moving average line but again got support and remained above the lows of our entry day (3).


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The Strength Comes And Goes

Once the Nasdaq composite had its follow-through day, Live Nation stock seemed to perk up as well. As April started, Live Nation cleared its downtrend line more decisively and looked poised to run (4). We took our first third off the position after reaching our 5% profit goal the next day (5). It also ended up being just shy of a near-term top.

With many of our rotation and reopening plays, this is where things got tricky. Live Nation stock fell below its 5-day moving average (6) but it wasn’t decisive and we’ve been using the 10-day line more often recently as a place to protect our profits.

As LYV stock fell more, it stopped right at its 10-day and 21-day line (7). This would be a logical area of support. Even when that was broken, the 50-day line was not too far away offering another potential support area (8). This line also coincided with the price level around 84 where the stock formed resistance around our initial entry (1).

It wasn’t until the clear break of the 50-day line that we had no choice but to throw in the towel (9). But an important take-away here. As much room as we gave up off the top, we still ended the trade with a gain. How? The early profit taking (5). We gave Live Nation stock a lot of room to work. Locking in a partial gain kept us from losing capital in the process.

More details on past trades are accessible to subscribers and trialists to SwingTrader. Free trials are available. Follow Nielsen on Twitter at @IBD_JNielsen.

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