Registered User
Joined: 5/24/2005
Posts: 16
|
You that are well seasoned in trading, I have a question.
I bought WSO on 12/13/05 at $67.30, now it is down to $59.07. I have been taught by whom I consider a good teacher (and others do also, and no, not a TV guru) and I study the technicals thoroughly before each purchase! I thought this looked good for short hold or intermediate hold. An engulfing white or springboard, increasing volume, Good BOP, great looking divergence on TSV, decent RSI and good money stream. What did I do wrong here? What did I fail to see? I don’t look at news very much so maybe that had something to do with it (even though I was taught not to trade on news) I am almost paralyzed at this disaster, I ask myself, do I sell or hold and I have no answer.
I paper traded for a long time before going live, have made 3 successful trades before this (only netting a small amount though)
Guess I should add that my charts are not set at Worden defaults.
I will appreciate all input!
Thanks much,
Rod
|
|
Registered User
Joined: 12/18/2004
Posts: 180
|
Rod, I don't consider myself well seasoned enough to be giving trading advice on particular stocks, so hopefully someone else will reply. I will tell you this. If you are ever not sure what to do, that means that you probably have some reason to believe that the situation may not be entirally bad. Consider selling half of your position in these scenarios. Remember that time is money also when you do this. One thing that comes to mind that might be helpful for you are Don Worden's own Street Smart Chart Reading books. I think it is Volume 2 where he talks about Trends and Channels and how he interprets the stock in relation to its position within the channel.
|
|
Registered User
Joined: 12/18/2004
Posts: 180
|
...And it's better to be safe than sorry.
|
|
Registered User
Joined: 11/5/2005
Posts: 180
|
I wouldn't sell yet, I would wait to see if it finds support at the 50 DMA (57.30).
About WSO before it dropped 10.06%, stochastics looked oversold, MACD - bearish, TSV - bearish prior to the decline looked overextended, RSI - little to extrended for me. I wouldn't have bought because WSO looked as though it needed to take a breather, I would have waited for a pull back and waited for a better opportunity, seemed a little overbought. Just my opinions as I'm trying to be constructive.
|
|
Registered User
Joined: 5/24/2005
Posts: 16
|
I agree to some degree with your statement to maybe wait, that seems to hit the spot for me. Thank You for your reply.
Rod
|
|
Registered User
Joined: 5/24/2005
Posts: 16
|
r1cowan7,
thank you!
I also agree is best to hold for now.
I have not studied stochastics or MACD yet. It was not included in the initial class and review materials I have, I think it is in the advanced class they offer.
I now work with RSI, TSV, Linear regression, Money Stream with moving average,Bop with ma, Volume with MA, RSI.
Which TSV do you find more useful, TSV24 rate change12 or 18, 7 or 36, 14?
by the way, how would I post a message direct to you on this site? It seems to vary from one site to the next.
Thank You again,
Rod
|
|
Registered User
Joined: 5/24/2005
Posts: 16
|
Stmjd74, Thank you for your reply. I failed to include your nickname on the first reply to you.
|
|
Registered User
Joined: 5/24/2005
Posts: 16
|
r1cowan7
In the first post I forgot to mention that since I bought on the 13th, that I was looking at the charts for 12/12/05. I agree that the charts for the 13th were not good.
|
|
Registered User
Joined: 12/18/2004
Posts: 180
|
Rod, it looks to me as though you could argue that the stock was extended, if you apply an envelope channel of 50, width of 10, and maybe certain other indicators (I only checked the envelope channel). That said, it was obviously still undergoing adequate buying on increasing volume, as you stated above. There were really no divergences in TSV18 Simple, but it was certainly well above the zero line. Everything including BOP looked healthy, to say the least. Notice that momentum really increased in the last month or so, as stock appeared to "bow" upwards as it rose above the channel. Sometimes, stocks will do this and run on for some time before slowing down. I would see nothing wrong with entering a stock like this--you can see that plenty of other folks did. It's just that when it falls, it falls a lot harder and a lot faster. But you might have the potential of reaping a lot greater reward. I didn't check its industry group, either, which is especially important for momentum type stocks. As far as the analyst downgrade, the stock would have taken a hit regardless of how short-term overbought or oversold.
|
|
Registered User
Joined: 12/2/2004
Posts: 1,775
|
rodneyd, believe me when I say you are not alone. Every trader/investor has this happen to them from time to time, but if you say you feel paralyzed by the event it suggests to me that maybe you had too much of your money invested in this one stock. That's why I'm a strong believer in never having more than 10% of balance invested in any single stock. And in a bull market like we've had lately imo it is wise to keep a high percentage of your investable money at work. In otherwords, if one has 7 to 12 long positions open for the most part day after day, then you would think that a number of those would be winners. And thus taking the sting off a big one day loss like WSO. Another advantage of having several postitions is that it keeps you from becoming too emotional about any single stock. At least it helps me in that regard in addition to reducing risk via diversification.
As for buying WSO in the first place, I never would have simply because it was extended way too much for my taste, regardless of what a bunch of indicators say (I belong to the KISS philosophy:). It looked like it was begging for a pullback, analyst downgrade or not. Look at the daily chart zoom 3 or 4, you can see that in its uptrend it often has short term pullbacks of 7 to 10%. As for what to do now, excellent advice by other posters in this thread. Keep a close watch and do not allow it to drop much more. One suggestion: Never buy a stock unless you know in advance what you'll do if things go wrong. Know in advance where you'll place your stop, and if it gaps down way below your stop have an emegency plan. It could be to sell immediately, or place tight trailing stop, etc. And remember that what happened to you with WSO will toughen you up hopefully and make you a better trader/investor going forward. Good luck and remember that events like this happen to all of us and you will be better for it in the long-run if you learn from it!
|
|
Registered User
Joined: 11/5/2005
Posts: 180
|
Excellent posts above. Something I agree with is have an exit strategy, I remember the first time I was in a situation like WSO, I couldn't think, one minute I new it was going up so I wanted to buy more and the next I thought it was going down so I felt I better sell and I couldn't even remember why I bought in the first place (frustrating). What I learned was an exit strategy is important before you buy and I never buy a stock without one. Mine happens to be 7% limit below the purchase price, this way I can be wrong 4 out of 5 times and be right once (by being right I mean make at least 30%) and I'm still 2% in the green, more importantly I'm not chasing a stock (never do that). It's hard to recover from large declines and sometimes it's better to sell and mark it as a learning experience. The 7% limit order I place after each purchase is William O'Neils investment strategy. I beleive if you learn how to analyze stocks you can find better entry points and learn how to buy after a base is formed.
In the case with WSO you would have sold at 61.08 if you had a limit order in 7% below your entry point, it's called a profit to loss ratio. I think it's worth repeating, as you learn to buy you palce the 7% limit order below your entry point, you can be wrong 4 times out of 5 (assuming the 5th time you make atleast 28%) and you are even. The point is to get good at finding bottoms, it get's really nice when 4 out of 5 stocks are up 30% (or better)and only one is down no more than 7%.
|
|
Registered User
Joined: 11/5/2005
Posts: 180
|
rod, you wrote:
Which TSV do you find more useful, TSV24 rate change12 or 18, 7 or 36, 14?
[R1] I use 18, 25, and 35 to get a short to long feel for the stock.
by the way, how would I post a message direct to you on this site? It seems to vary from one site to the next.
[R1] I'm not sure what you're asking - sorry
|
|
Registered User
Joined: 5/17/2005
Posts: 221
|
this is a simple one ..it was down graded .... over reaction to news may be why it went down 10 % other than that it was in a good up trend. Look for support at 50 day MA....if it drops below that level sell it and look for some strenght in the stock in the near future for a buy signal
|
|
Registered User
Joined: 10/7/2004
Posts: 264
|
QUOTE (rodneyd) You that are well seasoned in trading, I have a question.
I bought WSO on 12/13/05 at $67.30, now it is down to $59.07. I have been taught by whom I consider a good teacher (and others do also, and no, not a TV guru) and I study the technicals thoroughly before each purchase! I thought this looked good for short hold or intermediate hold. An engulfing white or springboard, increasing volume, Good BOP, great looking divergence on TSV, decent RSI and good money stream. What did I do wrong here? What did I fail to see? I don’t look at news very much so maybe that had something to do with it (even though I was taught not to trade on news) I am almost paralyzed at this disaster, I ask myself, do I sell or hold and I have no answer.
I paper traded for a long time before going live, have made 3 successful trades before this (only netting a small amount though)
Guess I should add that my charts are not set at Worden defaults.
I will appreciate all input!
Thanks much,
Rod
Rod,
What was your plan? What percent of your equity did you risk? Did you have a stop? The fact that you are paralyzed tells me that you had no plan. If you're going to trade you need a plan. Then follow your plan.
Here is my advice:
First, get out of the trade immediatly. Chalk it up to an expensive lesson. You must let these types of trades go. Move on. If you stay in, all you will do is dwell on it. Get out.
Second, take one chart template and remove all of your "indicators." Just have price and volume. Make sure you look at that chart before you decide. I think that looking at the indicators blinded you to the price action. Fact is that imo there was no reason to buy when you did. Over the previous 10 trading days, only once did price take out a low. Price was overextended. You needed to wait for a pullback, imo.
In addition, I do not see divergences in any indicators. What I see is a stock in a strong uptrend with all of the indicators at the top of their range. Good luck.
|
|
Registered User
Joined: 11/29/2005
Posts: 11
|
I'm a bit of a newbie myself and I noticed one thing on the chart that has really bitten me as of late -- buying a stock that is trading with a large gap between the MA pairs (either 20 and 50 or 10 and 30). My experience has taught me that one of three things will happen: 1) you'll get lucky and the price will continue to ascend at its current pace 2) you'll have a modest pullback that puts you in a bad spot because you are 7+% down or 3) you'll be in a really bad spot if it gaps down. 2 of the 3 things are bad so I have decided not to buy into a stock that is too far beyond its MA crossover (a buy signal for me).
I have been in this situation several times recently and it hurts because I have to pull out (my system won't let me stay in a 8% loss). However, several times the stock turns around and starts ascending again in short order. Frustrating. One of my "rules" that I have added to my system is to avoid this scenario. This may be an overly simplistic version of what golfman has described, but my experience nonetheless.
As a newbie I am going to start with the basics and just focus on MA crossovers, Price action, and volume as my leading indicators for a while. I may get whipsawed a bit and learn a few lessons, but reading too many indicators overwhelms my judgement hurts my confidence. I also calculate the risk level I feel comfortable with and the stop price before I even purchase a stock. The stop price is based on volatility and only meant to keep the bottom from falling out on me. I'm mot sure that this kind of a stop-loss is popular or even the best idea, but it gives me a little bit of comfort. I normally don't utilize my stop loss unless the stock gaps against me. I try to head it off with other indicators such as MAs and overall position so I can see the patterns unfold.
|
|
Registered User
Joined: 12/18/2004
Posts: 180
|
This is just an opinion, and nothing more, so please don't take it as the gospel. A guideline I use is if the stock gaps down like this, sell half of the position immediately, and hope for the stock to try to fill some of the gap within the next one to three days, and sell the other half. Exit completely within the next one to three days, regardless. In the case where you do not respond fast enough to sell half immediately (as you can see, the stock closed near the low for the day of the gap), plan on a full exit within the next one to three days. In this particular case, as fp and r1 stated above, if the stock drops below the moving average, forget about trying to get a better price--get out!
|
|
Registered User
Joined: 11/1/2005
Posts: 240
|
I'm new also, I feel takeing part in the disscussion helps to learn. I didn't read each post, I could have missed it. a stop loss could have been used. when a stock has a good run like wso I would wonder how much higher it will go.
|
|
Registered User
Joined: 12/19/2004
Posts: 457
|
FWIW,
The weekly and monthly charts all looked to me that the stock was at a high risk entry point if you wanted to go long.
The momentum indicators I use were all severely ovebought on the monthly, with the short term montlhy momentum indicator negatively diverging slightly from price. This happened with the stock very close to the upper monthly Bollinger band. This set up tells me to expect some sort of pull back in the comming months.
On the weekly, the stock is grossly overbought with the close outside of the upper bollinger band. Considering the state of the monthly, that is not a very low risk point to be going long. Just the opposite.
I agree volume could be interpreted as looking good. But a custom volume indicator I use showed a decline in volume on a percentage basis at the near peak vs. the prior highs.
When you see grossly overbought readings on a trend that has been in effect for awhile, I look at that as a good time to sell.
I'm inclined to agree with those who say to cut the loss now. The technical damage has been done. Considering the state of the broad market, this is likely to get worse before it gets better.
Whatever you do, don't hesitate to pull the trigger. If you decide to wait, give this a specific amount of time to improve, then get out. Otherwise, sell immediately, at market.
You won't be sorry for getting back into cash.
|
|
Registered User
Joined: 11/29/2005
Posts: 11
|
QUOTE (jimstacy) I'm new also, I feel takeing part in the disscussion helps to learn. I didn't read each post, I could have missed it. a stop loss could have been used. when a stock has a good run like wso I would wonder how much higher it will go.
Yeah that is a good suggestion, but depends on your system. I use stop-losses right now for peace of mind more than anything. If a gap is bad enough, even that won't really help you as you could bust right through that loss point. The trouble is that stop-losses, depending on the condidtions, can whipsaw you on a stock that is peaking or starting to move laterally. Nonetheless, any insurance you can get is helpful.
|
|
Registered User
Joined: 10/7/2004
Posts: 264
|
QUOTE (awellman) If a gap is bad enough, even that won't really help you as you could bust right through that loss point.
Which is exactly why you need to limit your total position to a small % of you total equity, say 20-25% max. That way, even on a catastrophic (sp?) loss you don't lose everything. There was a guy on TC net today going after PW because he bot a stock PW wrote a note on and put 80% of his equity into it. It's down about 40%. Ouch. Good luck.
|
|
Registered User
Joined: 12/2/2004
Posts: 1,775
|
>>>Which is exactly why you need to limit your total position to a small % of you total equity, say 20-25% max. That way, even on a catastrophic (sp?) loss you don't lose everything. There was a guy on TC net today going after PW because he bot a stock PW wrote a note on and put 80% of his equity into it. It's down about 40%. Ouch. Good luck.<<<
Very well said Golfman, except I disagree with placing 20-25% of total balance into any single position, but that's just my opinion. At least for anyone other than pure daytraders. FWIW my personal rule is about 10% max when initiating a new position and later adding to the position for a max of approx. 15% and then only after stock has moved up some from original entry point. Ideally I like to enter a new position at only 5%.
|
|
Registered User
Joined: 10/7/2004
Posts: 264
|
Yes fpetry, I agree the smaller the better. I say 20-25% max only for those you have smallish accounts and have very short term trading horizon.
|
|
Registered User
Joined: 5/24/2005
Posts: 16
|
Golfman, FPETRY, awellman,STMJD,rgr1976 and more that replied to my posting, I APPRECIATE all your input and enjoyed reading them. As for a percentage amount to put into any one stock, I think it would be a good rule for me to follow! I think 10% but 15% MAX is great, unfortunatly I had appx 27% of my account tied up in WSO. Yes I will take the punishment and go on from here. I am aware this (losing some) will happen to all of us, so just as one of you said [i]Learn from it and GO on!. Also from this loss I realize I need more training and some refresh on what I have learned so far.
You folks are great and this is a great website to boot.
Thanks again!
Rod
..._._
|
|
Registered User
Joined: 11/29/2005
Posts: 11
|
QUOTE (Golfman25) QUOTE (awellman) If a gap is bad enough, even that won't really help you as you could bust right through that loss point. Which is exactly why you need to limit your total position to a small % of you total equity, say 20-25% max. That way, even on a catastrophic (sp?) loss you don't lose everything. There was a guy on TC net today going after PW because he bot a stock PW wrote a note on and put 80% of his equity into it. It's down about 40%. Ouch. Good luck.
I've been experiminting with a Volatility System which limits my total loss to about 1.5% of my portfolio based on a stop-loss which is predetermined using the volatility of that stock. Obviously in a gap scenario that stop-loss could exceed 1.5%. However the number of shares I purchase is based on the stock's volatility and thus I must buy fewer shares (in accordance with the system) of stocks that are highly volatile. I find that it usually works out to 4 - 6 stocks for my entire portfolio (if I were completely invested), so 20 - 25% total risk sounds about right if the stock were to gap down to zero.
Of course there are always things you can do, like only investing in a good market, fundamentally sound stocks, etc... to further curb your risk. But at the end of the day you have to be willing to take some risk if you expect to make any rewards.
|
|
|
Guest-1 |