Forum Archive Index - September 2002

["Nick McCaw" <nick.mccaw@golearn.co.nz>]

Regarding what I was looking at when I mentioned LHG in the “Monday” post last week.

 

LHG was text book stuff from a short term perspective, It had broken out of a downtrend, formed a higher low, and then an ascending triangle, and then the volume dropped away. And then it broke above the resistance and was easy to buy at $1.27.

 

Simple as that…… But “STOP” I hopefully hear you cry. “What is your plan from here??? “ (maybe I’ll just hope that it goes up forever)

Two options really, Firstly I could go for a quick profit and set an arbitrary sell level at a previous resistance such as $1.35 or $1.45. However I am not in the business of guessing what is going to happen, so I will use a trailing stop loss level. Currently set at $1.24. Mainly because a drop to this level would suggest that the support at $1.25 did not hold. In other words, the premise under which I bought the share (a break above $1.25) was completely wrong. As time moves on, I’ll raise that level, to hopefully lock in some profit. May look at trends if the current move is sustained.

 

This means that my downside on this trade is about 3 cents or around 2%, with some brokerage, this could creep up to 4%, but that is less than 1% of total capital, so a very acceptable position.

 

Might be a good starter for the Study stock idea,

 

Regards Nick McCaw