Quote from MTI_44:
I currently own AXR because they have a killer growth in the company and EPS and I was planning on holding on to it for a few months. Today it took a 21+% hit and had a bad breakout. Now I did read How Charts Can Help You in the Stock Market by Jiler and I forgot what he said about bad breakouts. A couple of weeks ago, IAAC had a bad breakout and it is still going down with a big volume increase (just like AXR) with selling. I also know that you should sell if the stock has gone down 7-8% since the price at which you bought it at, but this is a great stock, I think and I am not sure what to do. Any help would be great. Thanks.
Please tell us what method you are using and the purchase price.
I suspect you are using a variation of the CANSLIM notion. I suspect a CANSLIM variant because
http://finance.google.com/finance?fstype=bi&cid=1400 shows multi year growth in equity and earnings and CANSLIM stop loss is about 7 %; I recognize these as CANSLIM notion concepts.
I suspect that you purchased AXR on 16 January 2007 paying about $ 139 / share when price "brokeout to new high territory" of the trading range from about $ 115 / share to $ 139 / share, is that correct?
I suspect that you did not place a stop loss order with your stock broker to automatically sell your position if loss exceeds 7 % of purchase price. Nothing wrong with not placing a stop loss order, some methods do not use stop loss orders placed in advance with the broker.
I suspect you check prices after close and notice that you have a greater than 21 % unrealized loss.
I interpret the failure of AXR stock price to remain high as a measurement (symptom) of conditions. There is not enough buying power associated with AXR stock to put price to new historic high values and keep price near historic high values. I expect to observe the same price behavior in other stocks.
You might compare the recent AXR price behavior with the AXR price behavior following 14 October 2006. According to bigcharts.com about 25 June 2006 AXR trades at a historic high price of about $ 66 / share. About 14 October 2006 AXR price becomes greater than $ 66 / share and continues increasing during the following three months. Do you notice the difference in price behavior? If you buy AXR stock during October 2006 then more buying follows and stock price increases about 100 %. If you buy during January 2007 then little buying follows and high volume selling follows.
No one can predict the future reliably every time. I expect to experience losing trades. I stop losses to avoid situations such as the current AXR price decrease.
I occasionally take bigger than expected losses.
AXR might not be a "great stock". Sometimes the first indication that I observe of deterioration in the condition of a business is a decrease in stock price. Bad news might come later, perhaps 6 months from now.
Attached is a graph of DRL stock price. You might consider what happens if a trader buys DRL stock about October 2004 paying about $ 44 / share and does not stop the loss.
When I own a stock and price decreases to less than my calculated stop risk price then I sell the stock.
You might find CANSLIM notions perform better when you purchase stocks when
the Standard and Poors 500 index value is near the lowest values of the prior 12 months, your friends are talking about recession and how about how much money they are losing in the stock market.
