For the last couple of weeks I have been commenting
in the Sterling
Prime Stock Letter about the apparent narrow trading range
the overall market has fallen into. Not only does this make
it difficult to identify new trends in individual stocks for
trading opportunities, but it causes increased volatility combined
with smaller moves in what you may be attempting to trade. What
this results in is smaller moves in the expected direction,
the need to be willing to take profits sooner, and re-emphasizes
the need to correctly use "stops" to protect your
positions. One of the key things to maintaining profitability
in trading is to protect your profits and limit your losses.
Over the years I have developed 11 "Rules
for Trading." I am currently in the process of writing
a series of articles for Stock Upticks covering these 11 Rules
for Trading. In last
week's Sterling Weekly, I covered the Third Rule
Rule for Trading, "Move Your Stops Up (or
Lower for Short Sales) to Lock in a Profit as Soon as Possible."
In the 'Today's Comments' section August
14th edition of the Prime
Stock Newsletter I provided an example of how I would apply
the Third Rule of Trading to the day's recommendation on Newmont
Mining 'NEM'. I am reprinting that portion of the August
14th edition for this week's edition of the Sterling Weekly
to further explain the Third Rule for Trading. Hopefully you
will find this useful and helpful.
Today's Comments (from
the August 14th Prime Stock Newsletter): Tuesday's
economic news was released without much impact on the market.
The majority of the indices I looked at last night appear to
be moving higher. I am expecting the overall market to continue
to move higher. I am taking this opportunity to briefly describe
how I would trade shares of our recommendation on the open for
the benefit of our readers.
I am looking to buy the shares of today's recommendation as
close to the open as possible. If the shares look unexpectedly
week then I will see if they pullback and I can get them at
a price closer to the stop price, otherwise I will try to buy
the shares as close to the open as possible.
If the shares move lower for some unexpected reason and they
are below my cost basis, then I will hold the shares until the
stop price is triggered.
Once the shares move profitable by more than $0.10/share, then
I will raise my stop to $0.05/.share above my cost. I will repeat
this process when the profit is more than $0.25/share above
my cost, resetting my stop to $0.10-$0.15/share above my cost.
Then if the stock continues to move higher, I will do either
one of the following.
If a stock has a lower level of volatility, then I will keep
my initial stops in place, and allow the stock to move higher
and wait for the chart pattern to indicate the next stops level
or if the gap between my cost basis greatly increases then I
will raise my stop again to further lock in the profits, but
leaving some room for volatility. (I'll explain more on this
in later issues)
If a stock has a higher level of volatility, then after I have
set my initial stops to help ensure a profit, then I'll seek
to maximize my profits over a short time frame, by constantly
adjusting the stops to within a predetermined price of what
is at that point in time the intra day high. In the case of
Newmont Mining, today's recommendation, that would probably
be about $0.15 to $0.20/share.
Calendar for the week of August 18th
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While last week was a busy week in terms of
economic news, it was a slow week from a trading standpoint.
Recent editions of the Prime Stock Newsletter
||Recent Close or Exit Price
|Computer Science 'CSC'
||$43.62/share Aug. 12th
||We advised our readers to exit ahead of the earnings report
The Dow Jones Industrial
Today's Opinion: Closed @ 9,321.69
Current Expectations: Called
higher with the close on May 27th with the close of 8,781.35
The Dow Jones Industrial Average 'INDU' should move higher
and test 9,323.02 on a closing basis. The Dow Jones Industrial
has been moving in a narrow trading range between 9,323.02
and 8,985.44 with a slight upward bias since the Dow reached
its recent high of 9,323.02 on June 17th. The Dow appears
to be poised to close above 9,323.02 and break out of this
trading range. If the Dow closes above 9,323.02 then it will
have completed a "cup pattern" with a measured move
The S&P 500:
Today's Opinion: Closed @ 990.67
Current Expections: Called higher with a Buy Signal on the
close of trading on August 8th @ 977.59 . The S&P 500 should
move high and test 998.68 and then 1,007.84
The NASDAQ 100 (NDX)
Current Opinion: Closed @ 1,253.63
Current Expectations: Called higher on August 9th
with a close of 1,223.14. The NDX should move higher and test
1,267.38 and then 1,298.37on a closing basis.