2020-02-23 06:28:58.012185 by Unknown

Author:Unknown
Language: eng
Format: epub

Now let's get to specifics so you will be sure to know exactly where your sell—stop should initially be placed, and when and to what level it should later be raised. Stock XYZ was in a trading range of 18'/4 to 20'/4 before it broke out and moved into Stage 2. You bought the stock at 203/21 and the initial stop was set under the round number at 17/8. Now all you have to do is sit back and wait. In the unlikely event that the stock breaks down, you will be sold out when the 177/3 stop is hit.

In the more likely and happy circumstance that your stock starts to move higher, here’s what to do. As long as the stock is above its rising 30-week MA, and the MA is rising in Stage 2 fashion, be sure to give it plenty of room to gyrate. We are going to trail the sell—stop behind the advancing price in the following manner. After the first substantial correction of at least 8 to 10 percent, you are now going to get set to raise the stop. But you don't actually change it until your stock ends its correction and moves back toward its prior high (point A on Chart 6-21). If a break below that correction low (point B) would also violate the 30-week MA, that is a valid point to which an investor should raise the sell—stop. If, as in this example, the correction low is above the rising 30-week MA, place the sell-stop below the MA (point C). Continue moving the sell—stop up as the MA advances (points E, G, 1, etc.). In this case the correction low is 21, while the MA is up to 20. The sell—stop should therefore now be raised to point C at I97/8 (under the round number of 20). One last point. Don‘t raise the stop to 197/8 until after the stock rallies well off the low at point B back close to prior peak A.

Next, the stock rockets ahead in normal Stage 2 action after the first correction. After peaking near 35 (point D), it corrects back to the 28 level before resuming the advance. At this point the MA is up to 26. Therefore, when you raise the sell—stop place it at 257/a (point E). Again, don’t raise the stop until XYZ rallies to point

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