STOCK PLAY: CXW With 6 to 1 on Your Money!
This is a great play that I hope you all enjoy and see the value in, because these don’t come around too often (OR DO THEY….). The play revolves around Corrections Corp of America (CXW) which just recently beat out earnings and gapped up above $47 climbing above $49 two days ago. This play applies a last price of $47.18 as seen on the chart as your buy point which is as of 11:04 AM is the real time last as well. First off is the chart:
Alright, now looking at that I know a few things technically about the stock. First off it’s current range line is at $47. There is a gap between $46.50 and $47, and actually $46.50 is another support line. These are important to us because if they are broken then then its game over. So, knowing these ranges we will apply a stop loss at $46.38, or $.80 below our buy price which means that if the stock hits our stop loss price, it doesn’t matter if we are in Hawaii sipping crisp, we will automatically be sold out.
Now for our upward potential. Sadly I cannot truly explain how I know the next number to you, but I will try anyways. Look back at the chart and you will see the stock hit a high of $49.71 on 10/05/06 after gapping up, this is upward volatility. Knowing this volatility and the current 50 day MA spreads relative to the stock price, I am calling CXW capable of moving to $52 by the end of November as long as our stop at $46.38 isn’t hit.
Lastly, now we plug in the numbers. You buy xxx shares of CXW at $47.18 and apply your stop loss at $46.38. With the stock capable of moving to $52 by the end of November, you take your upper exposure of $4.82 and divide it by your downward exposure of $.80 to get your odds number. That number is about 6.025, or rounded basically 6. So there you have it, 6 to 1 on your money. CXW may hit our stop loss in a matter of 30 minutes, but regardless I will be playing the math as much as possible knowing the power is in my hands. Go CXW!
Happy Hunting!
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Stop of 46.38 was hit. Low of the day so far
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I just got back from lunch and saw it happen as well. The market has trailed off here early afternoon, let’s see where it ends up. Best Regards Always. -Blain