[theory6453]

This thread will cover where to place your initial stop loss and how to trail it as the price of the stock moves higher in Stage 2. For the initial examples I've used a Global Trend Alert Newsletter that I received from Stan Weinstein as a free sample last March. So the examples are the actual positioning as suggested by Stan himself in the March 2012 GTA, and hence we can study these old recommendations to learn the correct positioning for ourselves. So remember these are over a year old and were made when Weinstein viewed the longer and intermediate term outlooks as still bullish at the time, but the short term as only moderately positive, but "beyond extended" with more near term warnings than they could keep track of and with signs of “churning” on the tape, as stocks had broken out and gone nowhere in a hurry. So he was emphasising the "Forest to the Trees" approach - which can be found on page 75 of the book and suggests stock picking the best few chart patterns from the strongest sectors only when the overall trend is positive as it was back then. So hopefully that gives you some context to these charts as the majority likely failed to get very far in the short term, as it was around five weeks before the intermediate term top in the S&P 500 and hence there was likely a lot of failed breakouts in these, at least in the short term. Which I think highlights the importance of the overall trend and the type of buying you do at particular points in it. But that is a subject to discuss in another thread as this thread is to learn correct stop loss positioning and so doesn't matter whether these were successful or not, just that the stop loss would have protected the position from further downside if it failed in it's breakout.

I plan to mark all of the charts up on the daily and weekly charts that I use from stockcharts.com that show the key moving averages, relative performance versus the S&P 500 and the volume. But to begin with below are the Investor and Trader ideal charts recreated and updated from the charts in the book on pages 185 and 195 which around where you will find the stop loss section in the book.

Trailing Stop Loss Guide for Investors (Average 12 months)

I will write out the full description for these diagrams when I have more time. Refer to the Chapter 6 in the book for a full description of how to trail your stop loss. Below is the recreated diagrams...

Question re: initial Investor Method stops…

EGLE dropped 30% today on poor earnings and triggered my stop. The Stop Loss Positioning guide from Stan’s book states to set the initial stop under the lower support of the trading range. In his example, the trading range is flat ($35.15 – 40.15) and the stop is placed under the trading range support @ $34.89.

See attached EGLE chart. I had my initial stop set under the MA of the last pullback at $3.30. I realize after re-reading the SLP guide that this was likely wrong and I should have had it set under the support of the trading range. However, I’m unsure where that trading range should have been defined. I’m thinking it should have been under my green line support at around $4.00 (blue arrow). To give some background, I originally bought in @ $5.27 when the EGLE broke above upper level green line trading range in 2nd week of September.

So… my question is… was my initial stop too loose @ $3.30 (I’m thinking yes)? and if so, where would have been a better place for it based on the attached chart and when trading ranges are not entirely flat.

Appreciate any feedback.

Thanks,