KNOWING WHEN TO LOCK IN PROFITS ................
On February 25, in message #8341, which this message is linked to, I shared a strategy on how to lock in profits that were created by momentum stocks. The uranium stocks were being run up by momentum traders, and if one doesn't know when to lock those profits in, then they don't count.
I use an indicator I call momentum bands. If those bands are heading up in a northeasterly direction, and price is above the upper band, price is being driven by momentum traders.
Here is what I had to say with regard to taking advantage of such a run up.
>>> I use an indicator referred to as momentum bands. They are like Bollinger Bands, in fact they are, but with a different set up. Instead of a 20 period time frame with 2 deviations, I use 1 deviation. It provides a more narrow range for price movement.
Once price moves above the upper momentum band, you have a stock being driven by momentum traders. I stick with the trade as long as price stays above the upper band.
When price closes below the upper band, I sell 1/2 of my position.
If price moves back up, I buy the position back.
When price closes below the middle band, I sell my remaining 1/2 position because the indicator confirms the upside momentum has petered out. <<<
I used LAM.TO as an example at the time and sure enough, the timing of the message could have saved a lot of profits for those who took advantage of it.
Now it's time to look for another entry, and the beauty of the strategy I shared is, if price heads back up, those who held break even. Those who locked in profits and buy back at the lower prices, compound their profits. For price to turn and run up to the recent high on LAM.TO, it adds another 27% to the profits already earned. Think about it.
Here is STM.V:
The strategy would have locked in profits near the high. Buying back now and testing the recent high would add 32% to profits already locked in, as opposed to moving up 32% now to get back to even, or where you were at the time.
Here is PXP.V:
For price to get back up to its recent high, it would now add another 27% to profits already locked in.
When the market provides windfall profits such as the explosive price movement we just witnessed, we must learn to lock in some of those profits, even if we are a long term buy and holder. The examples above show how we can add incredible rates of return to positions if we just learn when to take some off the table.
After all, profits don't count if you don't take them.
dabum |
