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John V.
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My methodology is based on William O'Neil's brilliant book "How to Make Money in Stocks" and I'm constantly searching for super-winning stocks. I utilize the CANSLIM strategy popularized by O'Neil and I've added minor modifications to suit my needs. The steps in my process are: 1.... More
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Keep Investing Simple, Stupid!
  • Three trades review 0 comments
    Aug 15, 2011 3:11 PM | about stocks: ATHN, LULU, SODA

    Before the recent market crash I was able to identify and buy three stocks from May thru June, and these three turned out to be very successful and very profitable trades for me.  What I want to do is to show how I bought them, how I held them, and most important how I sold them.

     

    I do not trade that often and am a horrible intra-day trader, so you'll find my trades to be more positional and trend-following than anything else.  What I am looking to do is find a positive trend and then ride it for as long as possible.  Thus when the occasional crash comes along it really ruins my day.

     

    In normal times I use my trade-management system so when I buy a stock I can implement my rules with the first goal of not losing money.  As the trade goes into my favor then my overall objective changes and I start trying to lock in profits.  My general target is to get 20% and up in terms of profit, and I am thrilled if I can come away with at least a 20% gain.  My system uses trade-trigger stop-losses to lock in gains, and as a stock moves up, they move up too.  The hope is that the stock goes up huge and that I capture a large portion of the move.

     

    What sells me out is when a stock trades thru the trade-trigger which then generates an order and I am sold out.  I try and place these at areas with low-probabilities of them being triggered, and if they get set off then it usually means the stock has gone thru a point that it shouldn't have if it was a true winner, so in the short-term you probably wouldn't want to own the stock after my trigger goes off.

     

    I'll always give up a portion of the gains that 'could have been mine' primarily because I am not good at selling to maximize gains.  In my opinion there is a big difference between 'Maximizing gains' versus simply benefiting economically from your trades.  I try to 'benefit' because I think maximizing is extremely hard to do as it requires you to sell at the top on a regular basis.  If you're good at that then send me a note on how to do that consistently.

     

    The three charts below show one I consider to be a great trade, one I consider to be a good trade, and lastly one I consider good yet also was very emotionally tough to handle.

     

    The charts show where and when I bought, where I placed my trade-trigger stop-losses, and when and where I got as declining prices hit my triggers and sold my stock.  Most interesting is what happened to the stock prices afterwards because it shows how using the trade-triggers protected my gains and saved me a great deal of money.  If I hadn't had them in I can guarantee that I would have sold in a panic at far lower prices.

     

    The first trade is Lululemon Athletica (NASDAQ: LULU).  Lululemon was a great trade in that everything I did worked, and worked right away.  Honestly, this was an effortless trade with very little worry or angst at all about the stock because all it did was go up.

     

    Athena Health (NASDAQ: ATHN).  Athena was a good trade in that it also started working right away, yet it was disappointing in how it gave up all of it's gains in a single day before stopping me out.  I take that as a sign that the stock lacks serious Institutional Support at present.

     

    Sodastream International (NASDAQ: SODA).  Sodastream was a good trade but very emotionally difficult to handle.  There were actually two sets of trades in that the first set I made a small amount of money as I got stopped out, while the second was successful.  What made SODA emotionally draining was mainly due to the volatility of the stock.  Note how I got stopped out at $66 and then the next day the stock blasted higher, that was hard to swallow.  Ultimately everything worked out for me as I was out before it got destroyed during this latest earnings.  Strange how it all works out but I'll take it.

     

    While I was sad to see these stocks go, I was very happy to have made and kept a good chunk of the gains from these trades. The actual Buying and selling is easy, what is hard to do is control your emotions regarding the trade itself and the money attached to it.  If you can do that then you're well on your way to success.

     

    Now I'm back to analyzing and evaluating stocks for the next round of buys as hopefully those will be the ones that trend high into the sky.  Good luck and happy hunting.

    Stocks: ATHN, LULU, SODA
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