Question:

I appreciate all the upgrades you’ve made to selfinvestors.com since I
started subscribing in July.  However, about the only thing I’ve accomplished,
since resuming my active investing last June, has been to limit my
losses.  After numerous trades, my only significant gain was 21% on DHB.

I’m sure some of this resulted from poor decisions on my part.  But one
problem is that, even if I could arrange to watch specific stocks in
real time and/or receive your buy & sell e-mails in a timely manner, my
day job doesn’t lend itself to making immediate trades.  With few
exceptions, I must make my buy & sell decisions in the evening or early
in the morning–before the market opens & before you send your buy &
sell e-mails.

Last night I made another decision that is not working out well.  After
reading about OMM on your watch list, I researched it at investors.com
& other internet sites.  The fundamentals & earnings report seemed very
good, and the stock was up nicely in after-hours trading.  I bought at
the open today (with a limit order) and am already down more than 7%.

I’m seriously wondering whether I should return to investing in mutual
funds–which I don’t find particularly interesting.

I’d welcome your comments.  Thank you.

My Response:

As far as the time issue I understand.  Other members have expressed similar
concern about implementing this method successfully while maintaining a full
time job.  It can be done.  I’m willing to work with you until you are
successful if you’re willing.  You sound like you are.

A couple of key things from what you are telling me:
1.  I think I have mentioned this a couple to times before in emails, but
now I realize I haven’t highlighted this enough.  It is very important.  You
almost NEVER want to buy a stock in the first half hour of trading,
ESPECIALLY on a gap up after an earnings report.  In the first half hour
trading, overnight orders are filled and there is much manipulation going on
from market makers.  You get a much more accurate direction of a stock after
that first half hour.  In the OMM example, I was looking to pull the trigger
only if it proved the breakout.  What do I mean by this?  It proves the
breakout only if the stock clears the high that it made in the first half
hour.  The stock never confirmed a buy.  In your situation you probably
would not have been around long enough to wait to see if it would confirm a
purchase – what you could have done is set a buy stop order above the high
point of the first half hour.  The order will execute only if it clears the
high for the first half hour (you would just need to make sure that the high
point of that first half hour would still be within 5% from the pivot, which
in this case I would have been).

That is one strategy.  A safer strategy would be to just hold off on the
breakout and wait for a return to the pivot area, which about half of stocks
will do.  There is nothing wrong with holding off on the initial breakout
and waiting for the stock to return to an acceptable buy range (0 – 5% from
the breakout point).  The Buy Watch screen lists stocks near a breakout, but
also lists stocks that are still within an acceptable buy range.  For
example, INFY remains in a buyable range, but I’m waiting for a drop to
around the 72 range before entering.  There is a good chance the stock could
do this in the morning when you are able to watch or you could set a buy
limit order at 72, so that your order gets filled if it drops to that point.
DOW is another great company highlighed that has been slow to breakout which
could have been purchased this morning.