{"id":476,"date":"2004-09-15T18:19:59","date_gmt":"2004-09-15T23:19:59","guid":{"rendered":"http:\/\/selfinvestors.com\/tradingstocks\/mail-bag\/more-notes-on-buying-and-selling-strategy\/"},"modified":"2004-09-15T18:19:59","modified_gmt":"2004-09-15T23:19:59","slug":"more-notes-on-buying-and-selling-strategy","status":"publish","type":"post","link":"https:\/\/selfinvestors.com\/tradingstocks\/mail-bag\/more-notes-on-buying-and-selling-strategy\/","title":{"rendered":"More Notes On Buying And Selling Strategy"},"content":{"rendered":"

Question<\/strong>:<\/p>\n

I want to ask you a question and advice on something.  I read your notes on
\nGIVN and feel the same way about HANS today.  What happened to that thing
\ntoday???  I caught it right above it’s pivot point this morning and watched
\nit go over 30 and thought this will be a good one!
\nNext thing I know I am stopped out 7% down in a flash. I have to leave to go
\nto my part time job at 2:15 PM EST.  When I got back home, I saw where it
\nreally took a beating.  Thank goodness for stop loss orders.<\/p>\n

Here’s what I learned from this one and I want your advice on how you would
\nhave handled it.
\nI read somewhere that if you enter a trade, it should go up from the start
\nto some degree.  In other words, it should be a good trade from the start.
\nNow, it might wiggle a little after it moves up in a slight pullback but
\nshould not tank before the end of the day.  I usually watch a new trade for
\nsome time after I buy to see how it reacts.  I always immediately enter a
\nstop loss in case the computer or market crashes.  It is usually at some
\nsupport level around 7% to 8% below the buy price.  But today I learned to
\nput a shorter stop loss in on the first day especially since I can not be
\nhere all day on the trade day.  If it survives the first day with a
\nreasonable gain, then the next day I will move it lower.  At least that’s
\nhow I think it would work in this type of market.  In a bull market, maybe
\nthe 7% stop would be best.<\/p>\n

Finally, my question.  How do you handle a new buy the first day in this
\ntype of market?  Where would be the best place to put a stop loss on initial
\nbuy?  I know you can’t advise what to buy and stuff, but let me know what
\nyou might do in these circumstances.  And another question.  Bill says to
\nlet the winners run to about 20% from the pivot point before it bases again
\nand think about taking some profits while they are going up.  With this
\nmarket, many are not getting anywhere near even 15% before they fizzle. Two
\nstocks I am holding now have over 10% gain and I don’t want to lose it.
\nI’ll tell you what they are. JUPM is up 12.77 % and OS is up 11.51%.   How
\nclose do you think Bill would put a stop loss under these?  There’s no
\ntelling what could happen in this market we are in and I just thought I
\nwould ask.<\/p>\n

My Response<\/strong>:<\/p>\n

Let’s tackle your HANS purchase first… did you get a chance to read the report for this stock?  In it I said "  This is a stock that is showing heavy accumulation by institutions and appears to have room to run.  However, I would be hesitant to purchase at the formal pivot of 29.18 due to the fact that it sits far above the first line of major support.  Any significant shake out in the stock will force you out of the position.  In a perfect world the stock will continue its decline to around 25 on lower selling volume, offering a better purchase point.  Does this mean you should avoid the stock completely should it surge from here above the all time high?  No.  Give yourself a chance at success, but be vigilant about keeping your losses small.  This would mean selling the position should it drop below the pivot point on increasing sell volume. "<\/span><\/strong><\/font><\/font><\/div>\n
<\/font><\/span> <\/div>\n
This an excellent company that should continue to do well, but keep in mind that just because it’s a great company and it surpasses a pivot point does not mean it’s a great buy.  In that report I suggested taking a look at the distance from the first line of major support and the pivot point.  Clearly, this is a stock that has run up quickly in the last couple of weeks, was far extended from support and needed to consolidate gains.  This is one of those breakouts that had a high probability of coming back to the pivot or worse, dropping more than 8% below the formal pivot.  (Now it could also be argued that the pivot is 25.29 – technically it is more than 1\/2 up the base.  I didn’t list this point as the pivot because I felt that after the run up it had it needed to spend more time consolidating and that a proper pivot would be higher in the base – in the future I will leave personal opinion out of it and stick to the technical rules for finding pivot points).  <\/font><\/span><\/div>\n
<\/font><\/span> <\/div>\n
Now, that being said, I don’t think it’s a mistake to take a chance on a breakout of a stock like this.  Stocks have certainly shot to the moon without a meaningful consolidation in the past and will happen again, but not very often.  However, this is not a stock that I would have purchased, set a 7% stop and walked away from.  It’s one that I would want to monitor (i’ve attached an intra day chart to give you some thoughts on how I would have played this during the day).  <\/font><\/span><\/div>\n
<\/font><\/span> <\/div>\n
OK some tips on making the purchase:<\/font><\/span><\/div>\n