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How To Lock In Gains In A Rally

|Includes: AGN, Empresas ICA S.A. DE C.V. (ICA)

"Let the winners ride!" This is what almost every expert will tell you to do... unless the market is too choppy. Then they say, "Make gains, take gains."

I use a strategy that allows me to do both in my Macro Trader portfolio.

It's called a trailing stop, and it's allowed me to lock in cumulative gains of 36.12% on open positions in my portfolio. This is a key distinction... I'm still holding these stocks, but I've captured double-digit gains in the past eight months.

Here are real examples of my two favorite holdings.

On April 18, 2012, I told my Macro Trader readers about Watson Pharmaceuticals, Inc. (WPI:NYSE). I said:

Watson is making waves because of a $6 billion takeover bid for generic Swiss drugmaker Actavis.

This would be one of the biggest takeovers of the year, and banks are falling all over themselves to get a piece of the action.

Bank of America is said to be the front-runner, but the play isn't in the banks. It's in WPI itself.

You see, WPI is one of the top five biggest generic drug companies in the world. Actavis isn't much smaller. So this deal would bring together two of the biggest companies in the field, and give WPI unprecedented access to Central and Eastern European markets.

WPI has since completed its acquisition, and is now the third largest generic drug company in the world, and the new company is going to save hundreds of millions of dollars in costs. Here's how the markets liked the news.

). ICA is a heavy construction company with projects in Mexico and other Latin American countries.

It builds things like bridges and airports, dams and highways, commercial real estate, energy infrastructure, and plants and factories... I said:

Between 2013 and 2018, Mexico's investments in infrastructure are expected to be 5.5% of GDP, much higher than the average 4.6% of GDP between 2007 and 2011.

In the first quarter of 2012, ICA had a backlog of $2.79 billion, and over the past year, ICA's share price has climbed 40.49%.

Well, ICA has kept climbing. The black circle marks our entry point at $7.45.


By Oct. 17, we were sitting on a 23% gain after a fast move higher. Our 10% trailing stop was placed on the closing high price of $9.13. That gave us an exit point of $8.21, a gain of more than 10% above our entry price.

And like WPI, ICA has kept on climbing... moving our trailing stop ever higher and locking in more and more gains.

Just yesterday, ICA closed at $10.45, giving us a locked in gain of more than 26%!

But the best part is that ICA is up again today, and we're still in the play to keep capturing those gains.

The trailing stop is a great tool to use in rallies. And it's especially effective with fast-moving stocks.

Happy Investing,


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