[isatrader]

Good morning,

Before I start to gather capital for new purchases, I'm evaluating my current holdings (of which there are many Stage 4 stocks ). My first step that I'm taking is looking at what stocks I hold are currently Stage 2 and where to start putting the sell stops. I'm evaluating my holding of AMZN and it seems to be a great Stage 2 stock at the moment, but the dips aren't coming anywhere close to the 30 week MA. Do I still set a sell stop below the MA even if that means 20%+ drop to reach it?

Here is a link of my chart. Huge assumptions that I've set it up correctly. http://schrts.co/WzuWn5

Thanks in advance for the advice. At the moment, there is no sell stop set. This is my first one.

It depends whether you are a trader or an investor, as the stop positions for both are very different. If I assume that you're an investor then the stop loss position is a long way a way currently, and the stock is in Stage 2B with three continuation moves in the last year since it's Stage 2A breakout. So I believe the book suggests taking some profits off of the position when it's extended after such a great Stage 2 run, as it is in the later stages of a normal holding cycle of up to 12 months.

The reason for the wide stop losses in the investor method is that they are more disaster prevention stops imo, as you need to allow stocks to make natural corrections based on their own normal volatility when they get extended to give the change for the moving averages etc to either catch, or pullback all the way to test previous lows. Think about it a different way. AMZN is currently 89% above the Stage 2A breakout level in under a year, and has already had one 22% correction, which if you'd had a tighter stock than the investor stop method suggests, would have made you miss the additional 42% of the up move.

I'd say as an investor the stops are there to protect you from disaster, and are not the same as trader stops, so only put them where you are willing to actually give up on the investment. Of which the investor method stop is a good guide imo.

So make you own decision on how to proceed. But I recommend re-reading the stop loss sections in the book and looking at historical examples of stocks in similar positions.