Why charge when you can buy Mastercard in cash and make a 37% gain in two months. My physical stop has been placed with a GTC trailing stop 10% below the 52-week high. Any direct red flags (hard reversals on large volume) will force me sell prior to waiting for the trailing stop.
I first posted my analysis on Mastercard (MA) back on April 2, 2007:
Is Mastercard Priceless
$107.28 – “Bottom Line: MA is rated a buy in my book and I am grabbing shares today.”
I followed up this analysis with an update on May 3, 2007, Mastercard Pays Off, as the stock closed above $126; this still allowed investors a chance for a 16% gain to date.
Mastercard closed today at $147.13
Baidu.com (BIDU) was highlighted twice in one day as I recommended it as an immediate buy after returning from my Hawaii vacation in late April. It has worked well and now has a 31% gain in one month (not bad!).
Baidu.com (BIDU) buy Opportunity
$103.50 – “Short term target for BIDU is $118 area based on point and figure chart and fibonacci retracements.”
BIDU Stock Analysis
$104.34 (chart quote) – “Looking at the charts, I see a golden opportunity for a buy right here near the 200-d moving average with a confirmation above the 50-d moving average (which we got yesterday). “
“I mentioned a short term target of $118 earlier today based on Fibonacci retracement levels and the triple top breakout on the point and figure chart. A full 100% retracement and complete cup formation would take the stock back into the $130’s.”
Baidu.com closed today at $135.69.
Don’t sell for the sake of selling and continue to follow the trend. Place your physical sell stops to guarantee at least a 20-25% gain in both stocks (preferably better). We don’t need to be greedy as the fundamentals still look solid for both companies. Ride the trend and don’t guess the top as some stocks that may seem high are still low to others!
Chris, A few questions regarding your point of guaranteeing a 20-25% or more gain.
I have several stocks in which this is the case:
*MA up well over 100% with my initial position at $42.75
*AAPL up over 27% with my initial position at $92.90
*PCS up over 43% with my initial position in at $25
*TWIN up over 42% with my initial position in at $48.80
If one follows IBD, which I do, TWIN falls into the category of a stock moving 20% within a week and having to hold it for at least 8 weeks. This rule has provided me with an even heftier profit as I have added to my position and in turn increased my profits.
And now the question; how does one determine, at this point, where to place stops in order to retain some gains? If I set stops say 5% below today’s closing price, do I also enter buys slightly lower to get back in at a lower price just in case my stops are triggered?
I look at all of my positions daily (regularly) to look for any red flags and I have no problem sitting through bumps, but the hardest part for me has been when to get out.
Thanks for your input in advance.
Albert,
The IBD 8-week rule is sometimes right but I would never hold a stock for 8 weeks if it is flashing sell signals. Set a trailing stop of 15% to 25% from the high since you entered the position. This will allow you to weather the bumps without getting sold out but will get you out if the stock starts to tank due to some reason. See the math example below or visit my position sizing spreadsheet for the exact calculations.
If you are stopped out after a 15% decline from the top; I wouldn’t recommend getting back in at a lower price unless the stock is holding another support area or forming a new base above a major moving average.
Some traders will sell when a stock drops ‘X-times’ greater than the average true range (ATR).
Sell Stop Example:
Buy at $50
Recent high is $73
Stock is now at $70
Set the stop 25% from the 46% peak gain
or ($50*46%)*25% = $5.75
Protection stop can be placed at $73-$5.75 = $67.25
This will guarantee a 34.5% gain from the initial buy point at $50 but also give the stock room to grow.
Your GROW pick looked awfully smart Friday afternoon. I still don’t know what caused it to jump 17% in 3 hours. I think I owe you a beer for bringing that one to my attention.