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Strategies & Market Trends : You buy a stock. It goes down, now what? -- Ignore unavailable to you. Want to Upgrade?

To: Bald Eagle who wrote (67)	7/9/1998 6:25:00 PM
From: LTK007	Respond to of 112

Chasing down can be very dangerous,but it also can be very rewarding,the key thing is vigorously evaluate the situation--I will give a real experience i just went through--I was holding DHI at 21&3/4 and an interest rate scare smashed the whole HomeBuilder sector-- my Horton stock on the first day dropped to 18&7/8 and I doubled my original position,and on the 2nd day it dropped to 17&3/8 and I bought again and thus had tripled my original position. Two days ago I sold my original position at 22&1/4 and now have a cost basis of 18.25----but I knew my stock,I knew nothing had changed, and I averaged down into an irrational sell-off. But in many cases I see people averaging down into a pit--I have seen it with oil stocks and semiconductors and disk drive stocks. To buy down "just because" can be BIG TROUBLE,one must REALLY think it through.Max90

To: Bald Eagle who wrote (67)	7/10/1998 9:38:00 PM
From: Wayners	Read Replies (1) \| Respond to of 112

Mr. Owl, What I've done when I've totally got myself in trouble is write the calls and take that money to buy protective puts. I also like to use stop limit orders or stop orders and placing them below important trendlines or support levels. I also make sure and this is probably the most important, to make sure I only buy into a stock using buy stop limit orders and placing those orders above key support levels or trendlines. That makes sure that I'm buying into momentum to begin with so I can place an initial stop above my entry price. That is always my goal. At that point I have a free ride. I'm also not ashamed to take profits and leave money on the table. I also only buy stuff on a strong uptrend with significant volume and investor interest. If it looks like my buy stop limit order is going to get hit on lackluster volume, I'll cancel it. I'll also cancel it if it looks like the stock is going to consolidate more. The best place to put these buy stop limit orders is above pinched bollinger bands areas just out of reach of false rallies. If the big rally does occur you get in. The mental stop does not work because of the tremendous slippage in price you get trying to put in the order--usually a market order whereas you could have easily gotten in lower with a limit price. Hope this helps somebody. Nice thread Mr. Owl.