Wednesday, February 10, 2010
Adding to positions
It is tough for me to figure out how much to add to a winning stock position. I've tried to be more methodical in selection of what to trade, some things have not panned out with small losses the past few months. I've had some small winners also but have not had much in the way of double digit gains in the past few months. I am now sitting on a winning pick with >5% gains. I have about 66% of available capital in this stock but only 2% of my starting capital at risk due to built in mental stop. I bought this stock on range breakout (rule), added after a pullback(discretionary), added as it went back through original buypoint (discretion) just prior to what would have been a rules based adding point. The stock has continued higher from there.
I am not sure how to handle this one now. In no ways am I considering selling this. Fundamental story is good, as are growth expectations. But I fear putting too much at risk in a single issue.
IBD canslim stuff would suggest concentrating on few issues without many positions, pyramiding in as stock moves up, with a maximum buypoint of old high times 1.05. My stock is just beyond that point now. In my view the chart has just completed a cup with handle breakout, with a subsequent pull back below the buy/pivot point. Some would call this a shakeout, I think some would suggest it adds to the spring or coiling move to rocket the stock higher. http://www.hankpruden.com/MTWyckoffSchematics.pdf I've gone all in on stocks and lost before, have rarely done well. This one is acting right. And I have heard that cup with handle breakout is one of the better patterns.
My trend trading interests of late would have me not get overly into highly correlated issues, certainly being all in a single stock is such. But I can also take entries based on planned 2% maximum loss. I've not set up my "maximum contract size" that the turtles had.
If you have any thoughts that you are willing to share, please do comment or email me. Thanks. Click pic for better image
Posted by nursebee at 6:06 AM