September 23, 2013:
Today my ExOne stock trade stop-loss was triggered, and the stock was sold as 48.75. Let’s review this trade to see what we can learn from it.
Below are the two links to previous posts on this stock trade:
First, right from the start, the trade did not go well. The 100 day moving average did not hold, and volume was higher than average on the selloffs.
Below is the ExOne stock chart from September 18th. Notice the high volume on the selloff, and how the price just sliced through the 100 DMA.
(Click to enlarge)
Let’s now look at today’s chart. Notice how the price rallied back up near the 100DMA, but that proved to be resistance, and sold off again to make new lows. Volume dropped, but the new low today hit my stop-loss, thus ending this trade.
(Click to enlarge)
I have found that trades that immediately start off poorly tend to end up with poor results. But rather than having me guess and try to outsmart the market, I use stop orders to let the market take me out. Some of the best stock trades are not profitable immediately, and mark time by building a new base before taking off to the upside. But this trade was not one of those.
This trade is a great example of buying a stock at support of a major moving average. When it did not hold, I took a small but controlled loss, and move to the sidelines.
Will I look to buy it again? At this point, will the 50 and 100DMAs not holding, there is no telling how low the stock could go. There are no obvious points on the chart to buy it with little risk. Many people try to pick bottoms in a stock, and end up losing a lot of money. Don’t try it if you want to become a successful investor – this is very risky and mostly leads to losses.
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