A look at NETP....or why you don't buy stocks that don't confirm, why you keep stops, and lastly, why you diversify your positions.
On the evening of Sept. 26th we had NETP show-up on one of our screenings for long positions. It met all the criteria and looked to start moving up on increasing volume. Also, there was no insider sells, which can often tip off what was to follow.
We placed it on our watchlist for Wednesday, since a stock has to break the previous days high to confirm a move and alert, NETP never broke 14 and never alerted, and was pretty well forgotten until it announced Thursday that it will have lower than expected earnings.
Friday the stock plunged from a Thursday close of 12.50 to open at 5.50, 56% lower.
Remember however, the stock never confirmed Wednesday as a buy. But you never know, and it could have very easily, what are the fall back positions?
First, we are cautious about the overall market and have been in what we call "lite mode" (since the beginning of month), which one of the attributes is trading smaller than your normal share size. Another attribute is more diversity or cash than in less risky times. Another is having a tighter stop and a recommended buffer above the closing price for holding overnight.
Paying attention to all these would have kept you from taking the hit that some traders took on NETP. But if you bought it the first of the week then took a 5 day island cruise, your saving grace has to be that you never put yourself in a position that you can destroy your portfolio with one position. Diversify or cash!
Good Trading!!
Sam
savvy-trader.com |
