Ian Woodward's Investing Blog

Bulls and Bears Make Money, but Pigs get Slaughtered!

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Mail-bag Question:  Started a position in early August in GLNG. Great pick. Nice dividend in September and expect them to continue. The High Jump is saying “get out now”. I didn’t expect it go to so high so fast, so now it’s hold for the long term and expect the pull back, as opposed to sell now and buy back in later. And the answer is……….……….

Answer: Earl (on the High Growth Stock bb) gave you great advice and told you what he did which was to sell into today’s high.  Net-net, never let a great profit turn into a rotten one.  I also see that Robert gave you further insight going back to 2003 on the High Jump which I didn’t go back that far, and he suggested that you should consider placing a trailing stop below the prior day’s close, raising it each day until you stop out. Today’s low is 25.01. He usually uses 0.6% below so 24.86. 

  

Here is more fodder for you to chew on.  Here is the long answer…And the answer is never simple.  But if you have been reading my blog, take a problem like this and break it down three ways.  The Highest High to date from the 200-dma is 75.1725% up (I show you all four decimal places so that you can cast your beady eyes on 1/14/2004 and see the number).  (Editor’s Note!  A beady eyed customer caught an error…it is Jan 14, 2004 and not 11/14/2004…Thanks Steve and his wife).  So the 200-dma is currently at 16.0904.  Therefore the highest you can expect TO DATE is $28.19. The stock has produced a double top so far at $26.25, so you have $2 more to go between friends.  Let’s assume you were really lucky and bought this beast at $17.00, which would be a handy $9 or a gain of 53% on your investment right now, not counting the handsome dividend.

Note that the decision of whether to sell into the high of the day or let it ride for another day is bounded by Earl’s and Robert’s points to you.  Watching the action at 11.45 Pacific Coast Time on a 1 day 5-min chart shows a beautiful cup and handle and a desire to try to break through that top.  So read on and you can make up your mind according to the next hour’s action.

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  1. If you are conservative, one rule is to take 70% off and play with the remaining 30%, when a stock delivers >50%.  You will have taken your Capital off the table and will be playing with profits.  Let’s assume you invested $10,000…that has grown to $15,000, between friends.  So if you take 2/3rds off or 66.7% off that means you recouped your $10,000 capital outlay and have $5000 PROFIT to play with.   So decide how much profit you want to give up and act accordingly.
  2. The bird in the hand is worth two in the bush.  As I write, it is trying one more time to get up to $26.25, and is currently sitting at $25.57.  It has also shown you that today’s support is at $25.25 so you can place a stop there and either take it all off or 70% off or do nothing.  If it can’t get through $26.25 then that may be all the ride you will get for now until it cools off a bit, so I have narrowed that decision down to giving up $1000 of your $5000 profit.
  3. Bulls make money, Bears make money and Pigs get slaughtered…but that only happens after the event.  So you sit tight and ride it through for now to see if you can get to $28ish and at least you know when your stomach says I was a pig and “shoulda, coulda, woulda”.  Your ONLY reason for saying that is that Transport-Shipping is the hot area to be in and since Stocks are like wolves and hunt in packs, you will keep a beady eye on DRYS, and EXM and when you see those stocks and your own GLNG getting hit, it is time to kiss it good-bye.  All of these got trashed recently and of course they are going again, and more importantly are setting NEW record High Jumps.  The bottom line is that the Ian High Jump Indicator defines when a stock is extended based on its past history.  Always look back to the Highest Jump it has recorded as a guide.  If it breaks that highest level, the stock is into new high territory.  Confirm that others in the Wolf Pack are also doing the same thing, and that might give you a clue of how long to hold onto the stock.  If they are, there is a fighting chance the stock can go higher.  There also needs to be momentum in the Market and of course the Industry Group, which there is right now.  Decide how much profit you are prepared to give up and act accordingly.  Never let a great profit turn into a miserable one 

Editors Note:  All three stocks, GLNG, DRYS and EXM set up Cup and Handles today based on a 5-Min 1-Day chart. They all sold off early in the morning having made highs for the day and then formed cups and handles.  So the answer is…if you didn’t sell early into the high of today, hold for another day!  The lesson learnt is to always look for the action in leading stocks in the Wolf Pack.   Best regards, Ian.  

One Response to “Bulls and Bears Make Money, but Pigs get Slaughtered!”

  1. ian Says:

    Hi Steve and your better half! Many thanks for finding the slip of my fingers on the dates as I want those who are learning not to be frustrated when I goof. Blame it on my fat fingers and thumbs, and thanks again. Best Regards, Ian.

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