Here’s Why It Pays To Listen To The Market
Depending how tightly you apply your
stops to a position, it can mean a substantial difference in the bottom line. In
general it pays to be as consistent as possible with your money management
rules. What happens though, when we have a solid profit “on paper,”
but our exit price is still pennies away and it looks like the technical
condition is changing?
10:25:24
Intraday
Setup Alert
KLA-Tencor (KLAC)
is down .13 at 37.06. News out of Novellus (NVLS)
has put some weight on the sector. KLAC is now trading out of a pullback from
session highs as it attempts to go positive. So far, the day has notched an
“inside day” in technical terms. Breakouts
above these levels come in above the 37.26 mark.
If you were using a .35 money stop (as I
happen to do quite often when alerting our subscribers to trades), you would
have missed selling a chunk of your position by .03 if you had been using a 2 to
1 risk to reward basis. Had we “known” that the 11:10 a.m. bar was
the top, we would have gladly have sold out our long position and been .67 cents
better off. Since I don’t subscribe to Miss Cleo, all I have is changing market
conditions, and patterns to tell me when “enough is enough."
In the case of KLAC, we know that as a large-cap
stock, its “path or plight” is most likely to follow the rest of the
semis, as well as the broader indices. With potential daily resistance holding
the upper hand in these vehicles as 1,2,3 tops were formed this afternoon, it
might have been wise, but not psychic, to take some off the table as the
conditions were “clearly” changing (no crystal ball needed).