ISRG Strategy for 3-18-10

• Posted by PortfolioTilt
• on March 19th, 2010

Hello Chart.ly, Drew here from Portfolio Tilt with a look at the recent action in ISRG.

The stock is clearly in a strong uptrend. Over the last few months, ISRG often found support at its 20 day moving average line (green line), but when this area failed, prices pulled back to long-term trendline support or the 50 day moving average line (blue) before leaping higher.

This is the ideal area to buy the stock, after a healthy pullback, because overall it offers the lowest amount of risk (based on nearby stop-loss area) and the highest potential upside. Although it is tempting to buy here at the 20 day EMA, we must ask ourselves; what am I going to do if the 20 day moving average fails and the stock declines about $20 to the 50 day moving average?

Keep in mind that the general markets are becoming very over-extended, and will likely need to work off the current overbought condition. So how exactly do we want to play this one?

Well first, if you feel the incredible need to purchase the stock right here right now, go in lightly, as you can always buy more if the stock breaks out. We can see a clear but small descending triangle forming, so we could play the breakout from this pattern.

By taking a small position, we give ourselves plenty of ammo if we get that pullback to our ideal entry point. Our stop is below two key areas, the 50 day moving average (blue), and the trendline that has supported this run since July 2009. If this support area is breached, a test of the late-January rising window is likely. As always, don’t forget to follow us on Twitter!

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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