3:33 PM – Adding to my KNSA position this afternoon as shares surge higher, advancing from near the 10 DMA to new all-time highs on above-average volume. That is constructive, momentum-backed price action. The stock maintains very high overall ranks and has been reporting triple-digit percentage earnings growth compared to the same quarters year over year. Today’s action is clearly bullish and this technical action is the signal to add another 1/3 to my position.

MY BUYS:
2/13 (1/3) @ $45.79
2/19 (1/3) @ $46.99

NEW COST BASIS: $46.39

James’ Trader’s Tip: Add to Strength, Not Weakness

• Adding as price advances from the 10 DMA confirms institutional demand.

• Breakouts to new highs with volume indicate accumulation, not exhaustion.

• Averaging up in strong stocks is often more effective than averaging down in weak ones.

• Position sizing should expand when momentum confirms the thesis.

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. The results were not pretty. But the trades 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.