Recovery in progress

Dear readers,

my old computer (a Linux box working since 2001) decided it was time to retire and decided to leave me.

I am currently finishing the data and analysis tool restore on a new box and I hope we should be able to trade again soon.

As for our current portfolio (BUCY, LANC and VR) I would suggest to hold, while update our stop loss price for BUCY to $54.49.

Some new buys

Two actions for us today:

1. Let's update our BUCY stop to $46.65

2. After 10AM let's buy LANC, GIGM and VR with a 1% trailing stop buy order and the following initial stop loss prices:

• LANC: $45.11
• GIGM: $3.75
• VR: $23.39

My blog disappeared...

... and I do not know why.

Anyway, here we are, with the updated stop loss prices for our BUCY and EROC.

BUCY: stop at $46.10

EROC: stop at $4.49

During the weekend I think we will have some new buy identified for next week.

See you soon

LHCG sold and new stop loss orders

I apologize for the delay, but I was on vacation.

We sold LHCG on October 29th at $29.55. The buy price on August 26th was $24.78 and we gained 19%.

Our portfolio currently consists of only two stocks: BUCY and EROC, for which I would suggest the following stop loss prices:

BUCY: $43.23

EROC: $4.45

Updated Stop Loss Orders

• APOL: $64.94
• BUCY: $30.33
• CSKI: $12.81
• ENDP: $21.88
• EROC: $3.47
• LHCG: $26.37
• WDC: $33.60

New Stop Loss Orders

We still have a pending buy for DBA (trailing stop at 1%). Remember to set a stop at $23.03 as soon as you buy.

New stop loss prices, a question and the strange case of MAXY

The strange case of MAXY

I sold MAXY, but I did not want to. Let me explain: I use eTrade for my trading and there is a technical detail that made me sell MAXY yesterday. eTrade uses Ask Prices for buy orders and Bid Prices for sell orders. So, since MAXY's Bid Price went under $6.63 my order was executed at $6.83. The day low was $6.75, thus higher than our stop loss level. I do not know if other trading platform manage stop loss orders in a different way, but I consider this as an accident that can happen.

The bottom line is that I take home a 9.5% loss on MAXY. If you still have it, keep the stop at $6.63.


Current portfolio and updated stop loss prices



The new stop prices I would suggest are:

• APOL: Stop at $61.14
• BUCY: Stop at $29.13
• CMTL: Stop at $33.27
• ENDP: Stop at $21.66
• EROC: Stop at $3.23
• LHCG: Stop at $24.02
• MIR: Stop at $15.75
• WDC: Stop at $32.30

The question

I received the following question in a comment:

Quick question, how effective are stop losses? I assume you're putting a stop limit on these prices, but on some of the riskier stocks, if the stock opens up really low, the stock will automatically sell. Is that a good strategy?

I try to answer, but my opinion is not necessary matching your idea.

Stop Losses are statistically effective. I mean they usually work. I read books and made simulations and I found the method I use to calculate stop losses works well (on average). It happens stop losses are violated and stocks are sold, and after that they continue to go up. For me it is just part of the game.

There are basically two ways to manage stop losses:

1. Set stop loss orders (this is what I do). If the price goes down during the day the order is executed automatically. Then the price can go up again in a dragonfly doji.
2. Simulate stop losses. Set alerts on stocks at the stop loss level you want. If the price goes down you get an email. At the end of the day you check. If the close price is below your stop loss then you sell the following day on open. What I don't like in this approach is that a stock it may happen to lose 30% in a day. If you use this method you sell the day after losing 30%, while with method 1 you sell during the day when you lose, let's say, 15%.

Your choice. I hope this can be of any use for you.

New buys

Today I would suggest to buy three stocks.

WHAT?
I would sugegst to buy the following stocks: BUCY, EROC and MIR.

WHY?
These three stocks showed a technical buy signal in the last couple of days. In addition to that, their fundamentals are good compared to industry average.

BUCY
Financials
- Average quick and current ratios
- Low debt
Value
- Low PE and Price/Cash Flow
Profitability
- Top Operating and EBIDTA margins
Effectiveness
- Top ROI, ROE and ROA
Growth
- Good EPS and Sales growth



EROC
Financials
- Good quick and current ratios
- Debt is higher than average (some risk here - never forget stop loss)
Value
- Low PE, Price/Sales and Price/Book
Profitability
- Top Operating Margin and good EBIDTA
Effectiveness
- Top ROI, ROE and ROA
Growth
- Top EPS and Sales growth



MIR
Financials
- Good quick and current ratios
- Very low debt
Value
- Low PE, Price/Sales, Price/Book and Price/Cash Flow
Profitability
- Top Operating and EBIDTA margins
Effectiveness
- Top ROI, ROE and ROA
Growth
- Top EPS and Sales growth


HOW?
I would suggest to place a 1% trailing stop buy order.

WHEN?
I would suggest to create the orders at 10 o'clock. In these way we will wait for the first 30 crazy minutes of the day.

THEN?
As soon as we buy I would suggets the following initial stop loss prices:

• BUCY: stop loss at $27.93
• EROC: stop loss at $3.11
• MIR: stop loss at $15.75