While it is arguable that I might be smarter than anybody, I am not smarter than everybody; thus, I abide by a specific rule: listen always to the market's message. I find the more I listen to the market's message, the more consistently successful my investing; the more I listen to myself, the less consistent my investing.
To hear better that message, I rely on four items: price, volume, pattern, and continuum (trend). Each of these items generate their own interpretations and (re-) actions.
Within the guiding notion of pattern analysis is the perception of support and resistance; what once was resistance becomes support, and vice-versa -- if identified correctly.
Please note the bases (delineated) in the chart of J Crew/JCG (below) -- at least until this most recent attempt to build a new intermediate term base.
the stock turned up precisely when and where it should have in the
first two bases, the third attempt failed. "Should have" because $40
represented the last breakout to new intermediate term highs and
the plotting for the 200 day simple moving average (sma) was also at
~$40; thus, a stock in a bullish position should have turned up at this
point, if it had even lanquished on crucial support for this long a
After having purchased my most recent lots
at ~$40 during the Spring (April and May), I was of course gratified
when the shares surged to $57. But with any swing up comes a contra
swing down, which can be meaningless depending upon your time frame and
objective. So I have in place another rule: when successful (e.g., JCG
to $57 from $40 in one thrust), acknowledge and embrace the coming
downswing -- as long as it does not dip beneath the previous base. When
the stock turns up again to new highs, [I] change the trailing stop to
the area of the former high (~$57 for JCG). I
predicate these high and low trades on intermediate term bases. Most
often this strategy works, sometimes not; but it does allow a short
term trade to morph into a long term investment. Recent examples of the
former would include Google/GOOG and Intuitive Surgical/ISRG; one example of the latter would be, alas, J Crew/JCG. iow, in re to this opportunity (JCG), I was wrong.
Which leads into another rule by which I abide: never allow a profitable holding to deteriorate into a loss.
I always will grant a stock sufficient leash to become a long term
investment; I never will allow that leash to become a noose.
item to note: point 1 in the middle base. Note that its lowest trade of
the entire 6-month intermediate term base occurs at the end of the
correction, not early on as in the more typical occurrence. This too
could occur with the shares today (point 2) albeit with one major
exception: the day the shares traded at the low of point 1, they also
reversed and closed on their highs. Such is not the case for Friday's
Despite this reality, and because I remain bullish on the opportunity for J Crew/JCG, I will continue to monitor the position daily awaiting a new pattern that screams, "Buy me!"
Full Disclosure: J Crew/JCG, formerly a Core Opportunity, now ø.