Time and price stops
One reader seeks greater understanding re this post, specifically...
There are a million and one ways to make money successfully when investing; nonetheless, each investor has his or her own individual objectives and tolerance for risk. Perceived generally, some investors prefer to purchase beaten-down stocks with the thought that they cannot decline any further; other investors prefer to purchase winning stocks with the thought that the share price will continue its momentum to higher prices. Each style works admirably well -- so well that I wed the seemingly competing philosophies via my perception of the specific stock's trajectory within a given periodicity. And then align that trend with my time frame.
Yes, Isis Pharmaceuticals/ISIS appears closer to a relative low (~$8), which argues auspiciously for a low-risk purchase. But two questions linger:
1) Do you know the final low; i.e., will ~$8 indeed stem a deeper decline? Certainly, I know no such thing.
2) Do you know when the upside momentum will return? I know not that item either.
Let's re-phrase those two questions as when will the decline stop? and when will the up trend resume? When I first recommended the position, I speculated on a continuation of the uptrend that gathered steam in early-November 2006. I based my interpretation on several items, not least certain key 'tells' I saw on the chart. But that pattern, or at least my perception of a particular pattern, has failed. I will not compound an error with a follow-on error; having misperceived #2, I stray away from mis-perceiving #1.
Alas, time has run out for this position at this time. Oh, sure, I could hold it patiently and await the probable upside breakout. Or I could re-purchase it then. (There is always the possibility the shares do not follow the bullish assumption.) Because I prefer to make all decisions as re my portfolio's holdings, I swallow my ego, sell, and move on.
But only trading lots; investment lots remain, as the chart's long term bullish picture remains. The stop level for investment lots remains in place -- now at $8, and rising (slowly).
I hope this reply helps.
-- David M Gordon / The Deipnosophist
Given the strong support for ISIS in this price range (see multiple resistance in 2002, 2004 & 2006) and the bullish outlook, why sell here instead of scaling in?Excellent question, Paul. Now would be a good moment to re-introduce a core tenet.
There are a million and one ways to make money successfully when investing; nonetheless, each investor has his or her own individual objectives and tolerance for risk. Perceived generally, some investors prefer to purchase beaten-down stocks with the thought that they cannot decline any further; other investors prefer to purchase winning stocks with the thought that the share price will continue its momentum to higher prices. Each style works admirably well -- so well that I wed the seemingly competing philosophies via my perception of the specific stock's trajectory within a given periodicity. And then align that trend with my time frame.
Yes, Isis Pharmaceuticals/ISIS appears closer to a relative low (~$8), which argues auspiciously for a low-risk purchase. But two questions linger:
1) Do you know the final low; i.e., will ~$8 indeed stem a deeper decline? Certainly, I know no such thing.
2) Do you know when the upside momentum will return? I know not that item either.
Let's re-phrase those two questions as when will the decline stop? and when will the up trend resume? When I first recommended the position, I speculated on a continuation of the uptrend that gathered steam in early-November 2006. I based my interpretation on several items, not least certain key 'tells' I saw on the chart. But that pattern, or at least my perception of a particular pattern, has failed. I will not compound an error with a follow-on error; having misperceived #2, I stray away from mis-perceiving #1.
Alas, time has run out for this position at this time. Oh, sure, I could hold it patiently and await the probable upside breakout. Or I could re-purchase it then. (There is always the possibility the shares do not follow the bullish assumption.) Because I prefer to make all decisions as re my portfolio's holdings, I swallow my ego, sell, and move on.
But only trading lots; investment lots remain, as the chart's long term bullish picture remains. The stop level for investment lots remains in place -- now at $8, and rising (slowly).
I hope this reply helps.
-- David M Gordon / The Deipnosophist
Labels: Lessons
posted by David M Gordon | 6:21 AM
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