The key to successfully trading with the Darvas System is to find the four to six fastest-moving, biggest-earning, market-leading stocks and then buy into those stocks either right before or right as they break out into new-high territory.
On Monday, WYNN became the latest such Darvas stock to break out.
In the Wednesday issue of Darvas Trader PRO, I showcased WYNN as a stock that was giving us a “pocket” purchase opportunity as it traded within a $95.88-$85.72 Darvas Box.
A “pocket” purchase can be made when a stock that is still working on a sound base gives us such positive price-volume action that we feel comfortable EASING into an initial position. This practice allows us to establish a new position before a Darvas stock actually breaks out, but it comes with added risk and you must adjust your position sizing accordingly.
WYNN gave us a second “pocket” opportunity on Friday – note the green arrows on the chart that accompanies this article.
But, if you don’t want to mess with those riskier “pocket” purchases, you can simply rely on classic Darvas breakouts for your purchases.
Why were we willing to make a “pocket” purchase in WYNN and what put this stock on our watchlist?
First off, the casino stocks have been surging higher based on strong current-quarter earnings for individual companies and big projections for the entire gaming industry. These casino stocks are rebounding sharply after taking devastating hits over the past two years as the global economy tanked.
LVS and WYNN are the clear leaders of this group, but LVS is extended past any decent near-term buy point.
WYNN, on the other hand, was trading within a $95.88-$85.72 Darvas Box. (This was pointed out last week in Darvas Trader PRO – prior to today’s breakout of that Darvas Box.)
Today, WYNN broke through the $95.98 on extremely heavy volume.
Not only that, but WYNN also rolled right on through the $100 level, which is often a point of resistance – and also a level that gives us a great pyramiding opportunity for adding to our position.
WYNN’s powerful move today was impressive and hopefully, as a Darvas trader, you were able to catch it either “in the pocket” or during today’s breakout.
– – – – –