Great Advice on Taking Partial Exits

MSTR is a good example of the "Partial Profit" or "Let it Ride" exit strategy. I entered the breakout-pullback setup at $84, with a target under the old high a limit order set at $89.85 (I always set the target a little below the round number). From there I move my stop up to the $84 entry level to lock in the profit.

The stock continued higher today, and closed with a new breakout bar (though on relatively low volume). This provided me with an opportunity to move my stop up again and lock in more profit. I moved my new stop up to $87 to lock in a $3 gain on the remaining shares. $87 is a good level since a failure of the breakout bar would be a negative signal.

Remember not to randomly pick new stops when "stair-stepping" your stops. You don't want to be stopped out by a random movement/natural volatility. Always look for support/resistance areas when picking the new higher stops.

The partial profit exit strategy will sometimes decrease the potential gain when the second half of the trade gets stopped out. It's easy to think to yourself, "I could have made more by just taking the full profit at my original target". However, it keeps you in the huge moves. These huge moves are well worth the cost of not taking the full profit at the intital target.

STEC Short Entry: Time to Take Profits?

Is it time to take profits in the STEC short? Entry was made back on September 24th at $30.75., so we are looking at a 15-20 percent gain.

My general approach to exits is to set a target based on support/resistance levels and take a partial profit at that level. As you can see from the chart, a consolidation zone is in the $22-25 range. Thus, I took profits yesterday around $26.

After taking profits, I move my stop to entry to "lock in" the initial profit. This allows me to stick with the trade if it continues to drop, without worrying about giving back too much. If price reaches the 200 day moving average, I'll take full profits.

Managing the Trade: Partial Profits in BEXP

In my last posts I talked about trade management. Today's trade is an example of how I manage a swing trade in a momentum stock. I took a 500 share position in BEXP on Monday at $15.50. My intitial target was set at $17.50. I exited half my position at this price for a $500 gain. I have no moved my stop up to 15.50 and will let the remaining shares ride until my stop is hit or I get another significant gain. Most traders love to be in this position because there is nothing to lose at this point. I have locked in my $500 gain and could make much more if the stock continues its uptrend.

MTL Exit

I exited MTL today for an acceptable sized loss. It's not difficult to guess where I exited. My stop was placed just under the 50 day moving average.

I've been asked if I now think MTL is a short play, since it has broke below support. I definately will not short at the moment. This is only a price breakdown. Volume was weak on the move below support. This suggests a recovery could take place. In fact, if price mounts today's bar on good volume (closing above 52.50) the stock would again become a long play.

Trade: UA

I sold 400 shares of UA at $69.10 (entry at $63.65) for a $2180 gain (+8.56%).



Considering the stock closed at $66.68, I can understand if someone reading this rolls their eyes at what looks to be perfect timing for exit. Please note that I left a comment regarding the exit in the the previous post (I did not have time to create a full post at the time).

I had two reasons for exit. One, the stock was right at my initial target of $69-70. Two, There was not enough volume in the stock or the market to think this was a momentum breakout that would lead to more upside. This is also the reason I added to my MS short.

I still like the stock and it currently resides at the top of my primary watchlist. I will likely enter if we get a little more of a pullback.

Today's Trades and Analysis: GMRK and DXPE

I sold 400 shares of GMRK at $53.85 (entry at $49.76) for a $1636 gain (+8.2%).

I sold 500 shares of DXPE at $52.35 (entry at $47.40) for a $2475 gain (+10.4%).

Self Analysis:

These trades are good examples of how I have grown as a trader. Last year, I would have most likely taken profits before my profit target, which was just under the recent high in both cases. Instead, I sent my targets right after I took my positions and fought the temptation to micro-manage the trades. The result was a combined +18.6% gain, rather than what would have likely been an 8-10% gain.

Trade Analysis:
Without going into too much detail, both of these trades offered nice breakout-pullback setups. I entered at support, which was at the bottom of the breakouts, just under price congestion.

While I am not very precise with entries, I am becoming much more focused on exits. Here, I timed my exits just under the recent highs, where there would likely be some panicked traders who bought the stocks at the high and watched it pullback.

As you can see from both of today's charts, that is exactly what happened. The stocks dipped right after hitting my profit targets.

After I have taken profits at the highs, I do not dump the stock off of my watchlists. If the stock bases and then breaks out above the old high, I may re-enter on the breakout, or allow the stock back on the breakout-pullback watchlist, in hopes for a pullback to what now is the old high.

I am still holding STLD, ZUES, SYNL and IBN

Trade Review: HOC

Before posting my review of the HOC trade, I'd like to answer a question posed to me after the latest "today's trades" post. The question:

You seem to hold on to positions for only a few days even though it may seem as though the position could move higher. why is that?

The person who asked this question is quite perceptive. While I've been on a tear of late, in terms of win rate and profits, I am still frustrated because I know I should be making more money. I have been exiting trades way too early, bagging profits when I probably should stay in a little longer.

The HOC trade is a good example. When I entered the trade, at $57.94, I posted a target of $62. While I didn't say it, that target was only for partial profits. My strategy was to then move my stop up and see if the stock could breakout over new highs, which I think is likely. Using this strategy, if it breaks out, I continue to make money. If it doesn't, that's fine. I break even on the remaining shares and still have my initial profit.

Instead, I was short sighted, looked at the nice looking profit that I would gain on all of the shares, and let greed and fear based emotions get the best of me. Looking at the chart below, you will see that the stochastic level has not given a sell signal. At the least I should have stayed in the trade with half the original position.

Note that I believe I made a mistake, even if the stock tanks tomorrow. It's about doing the right thing, not stroking the ego from one trade. If I trade properly, over time what should happen will happen more frequently than not.

Setup:
Low volume pullback to support of a trending stock in a hot sector. Early entry. The safe play would have been to enter on a confirmation move a day later. However, the stock was acting perfectly and a low risk stop was in place, making for a nice reward to risk ratio.

Results:
Entered at $57.94
Exit at $60.76
$1410 gain (+4.9%)
Hold time 2 days

Final Analysis:
Great entry off of a great setup. However, I should have stuck to the plan and taken partial, rather than full, profits. This would have given me the chance to catch a big move. The fact that volume was acting nicely and stochastics are not oversold make the timing of the exit awful. I should have held on longer.

What to Work On:
A. Sticking with the plan at entry
B. Psychological aspects of profit taking.
C. Exits: partial vs full profits.
D. Exits: pay attention to stochastic indicator

What to Continue:
A. The "low volume pullback to support of momentum stocks" setup
B. Early entries on good setups with good reward to risk