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Portfolio management question for my more experienced investing peeps:
When "averaging up," buying past the primary base's formal buy point when the stock successfully tests its moving average, how do you adjust your stop loss?
For example, the purchase shares precisely at a pivot point of $20 on high volume. You add to your position at $22 when it finds support at a moving average. Everything looks great from a price action standpoint, and there have been no red flags. Then the stock dips to $20.46 on average volume during a trading day when the general market is down. (Hmm . . . say, a day just like today.)
You're now at 7 percent below where you added to your position. Do you sell the same number of shares you added? Do you sell more than that?
Thanks for your thoughts.
If you're driven out of a stock by your sell criteria and then the stock rebounds the next day on high volume back to it's base position, do you consider it unreliable for the next breakout, or do you forgive and forget? Always seem to be punished for following my sell rules by a next day recovery. Was driven out of RVBD and RAX yesterday, both of which are up on volume so far today.
Excellent advise Tom.
Pages 163-164 most recent version of How to Make Money in Stocks (Green cover) describes market cycles. It says bulls last from 2 to 4 years.
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