Author: John Linnemeier
Model: Opportunistic and Adventurous
Disclosure: Long CHT at time of writing
I thought I’d share my entrance/exit strategy in brief.
First, I select a stock I want to buy. Then I look carefully at the historical chart for that stock and decide where I would have wanted to be in the stock and where I would have wanted to exit. Then I play with a pair of moving averages until I find ones where, when crossovers occur, they occur at those points when I would have wanted to enter and exit a stock.
As long a as a stock maintains the same “personality,” this will remain my strategy for that stock. Obviously, as with human behavior, past behavior is not a perfect predictor (nor a guarantee) of future behavior, but I’ve found it to be one of the best predictors that we have.
The recent market has been rough on everyone, and we’ve taken our lumps as well. I never argue with the market, and earlier in June my system produced sell signals on all four of our holdings at that time – AWK, IPGP, FEIC, and DDS.
We’re still in the black since the inception of this model, so things aren’t too bad. The important thing in a down market like this is to conserve capital, keep your powder dry, and look for opportunities that may present themselves now and in the future.
I bought shares of CHT on June 15. In a sea of red on that day, it was one of the few stocks that bucked the trend.
For the time being, I’m largely in cash though.
