$36 huh? Not so bad over the long run. Here's a few ideas:
CPQ is showing great strength right now, and earnings are just a few days a way. It's a big, fat blue-chip stock as well. Now if a stock is going up with good volume and strength why would you worry about setting a stop-loss, especially when CPQ is trading at only 15 times forward earnings, (should be up around 20 to 25). I think the only thing that will make CPQ shoot down right now is if they blow their non-existent earnings and show a bold negative. But if you have a stop-loss in place it probably won't do you any good. That's because when the market opens after all the bad news is out, the stock will tank so far past your stop-loss that the opening sell will leave you in the dust. And since CPQ is big and fat it will probably open low (while suckers sell) and then recover a chunk of the loss (as a buying opportunity is presented to the believers). You may find the stock trading at higher than you sold it for, on the same day, in spite of your brilliant stop-loss safety measure.
Personally I don't think a stop-loss is a good idea in CPQ. Can be a good idea in penny-stocks or small-caps where things are quite volatile. I think it's better to just use your brain to decide whether you're in or out. Whether CPQ will be good or bad to you. If you don't believe in CPQ then get out on the day before earnings. If you do believe in CPQ then hang on for higher highs after earnings when upgrades come out, or else eat dirt when they tank, and be responsible enough to accept that you took a risk. But you won't have a chance to ditch after the bell when news is released.
If CPQ tanks, it will come back VERY shortly in my opinion, because people are buying on the future with DEC built into it. Earnings are already known to be non-existent. So most people aren't going to care if they're good or bad, as long as it's not extreme. And we are moving into the Christmas season as well, which should be good to us.
But if you really want a stop-loss I would set it somewhere between $29 and $29.5. Reasoning: look at the daily chart with support up around $29.75. Also, if you do a 120 or 180 day Bollinger chart you'll see that the centerline between upper and lower Bollinger bands is at $29.7. If CPQ busts through this centerline far enough there's a high probability it goes to the low side of the band and then pushes down, (http://www.iqc.com/chart/default.asp), at least to the 26.5 or 27 area.
For me, I only set mental stop-losses, since most of the stocks I trade are in the Nasdaq which I can't put electronic ones on with my broker. For stocks on the NY, I don't bother, especially with a good company like CPQ. I'm in it for the long term @ 400 shares, (2/3 of my portfolio).
PS: some people use an 8% rule. They blindly place a stop-loss at 8% less than their buy price, then close their eyes.
Good luck! We need it! |
