Mid term: positions over weeks to months

Mid-term positions run from a few weeks to a few months. That is long enough for fundamentals, a company's sales, profits and outlook, to matter. It is short enough that price still decides when you leave.

What moves a position trade

Earnings cycles. Four times a year each company reports results and resets expectations. Guidance, the company's own forecast for the months ahead, matters more than the quarter just reported. A beat, meaning results above what analysts expected, paired with a weak outlook often sells off.

Sector rotation. Money moves between industry groups. When semiconductors, banks or energy lead the index for several weeks, the leaders inside that group tend to keep leading. The sector ETFs on the Markets page, like SMH for chip stocks and XLE for energy, show which groups are in charge.

The 50-day average. This is the average closing price of the last 50 trading days, about ten weeks. Strong stocks tend to hold above it on pullbacks. Two closes below it after a long run is a common exit signal for this time frame.

How to run one

Start with a half position. Add the second half only after the next earnings report confirms your thesis, the written reason you own it, or after a pullback holds above the 50-day. Say you buy 50 shares at $80, then 50 more at $88 after earnings back up the story. Your average cost is $84 instead of $80. You paid a little more, and the second half went in only after the idea started working.

The half position also keeps the early risk small. Say your exit is a close below the 50-day, which sits at $74. The first 50 shares at $80 put about $6 a share at risk, or $300. Buying all 100 shares on day one would have put $600 at risk before the idea proved anything. Recheck before the add: 100 shares at an $84 average with the same $74 exit put $1,000 at risk. In a healthy trend the 50-day has usually risen by then, which moves your exit up with it. A stock can also gap below the exit on earnings news, so the real loss can be larger than the plan.

Decide your exit in advance: a close below the 50-day, a guidance cut, or a price target based on a valuation you wrote down on day one. Anything else is a feeling, and feelings do not have stop prices. Any of these trades can still lose money, which is why the exit comes first.

Try this

Open the Markets page and write down which sector ETFs are above their 50-day average today. Check again in two weeks and note which groups kept leading. Then pick one stock in a leading group, look up its next earnings date, and write a one-line thesis and an exit you would use.