9:48 AM – Shares are breaking out to new highs this morning on above-average volume, and that is a clear BUY SIGNAL.

MY BUY:
2/13 (1/3) @ $45.79

CLICK/TAP CHART TO ZOOM
Chart services courtesy of stockcharts.com. Annotations by James Taulman.

To be completely transparent, below is the full history of my real-money trades in this stock. They were not pretty. But they were disciplined.

I first bought KNSA on Monday 12/22. In hindsight, the cleaner entry was the prior Friday when the stock initially broke out to new highs on roughly twice its normal volume. That was the true technical trigger. Whether Friday or Monday would have made much difference is debatable, because the stock immediately pulled back over the next several sessions.

On 12/26, shares broke below the 10 DMA. That was a bearish signal and a 1st SELL SIGNAL. At that point, I then shifted focus to the 50 DMA as the next key support level. The stock briefly dipped below there on 1/5, but managed to close back above it. That kind of shakeout can flush weak holders and sometimes reset momentum, and in fact the following session was bullish with strong volume.

CLICK/TAP CHART TO ZOOM
Chart services courtesy of stockcharts.com. Annotations by James Taulman.

However, the 50 DMA only held temporarily. On 1/13, a sharp, near blindside morning sell-off sliced decisively through the 50 DMA. That type of move is tough to manage along with— earnings volatility, gap downs, or swift institutional sell-offs. When those occur, I look for an immediate and convincing recovery to negate the damage.

The next session did show a +2.5% bounce on +128% volume, which was constructive — but it failed to follow through. Continued above-average volume declines into new recent lows had me making a full exit although there was logical prior support area around $37 from late last year. I did keep covering KNSA in the SwingTrades Portfolio with two SELL SIGNALS.

This morning, the stock is breaking out to new highs on expanding volume. That is a technical BUY/ADD SIGNAL. The past trade does not control today’s decision. The chart does.

Stocks exhibit bullish behavior and bearish behavior. When they break support, we sell. When they break out properly on volume, we buy. That is how this system works. No ego. No attachment. Just reaction to price and volume.