Ask Mike:
I need to know how are intra-week stop loss bulletins are handled?

Question:

Hi TurnerTrends,

Thanks for quick response on my previous questions appreciated.

A couple of other questions:

1. I got Mike's stop limits update bulletin today applicable for the Market Trend Portfolio only. Do you send out updates for all the portfolios when warranted? I guess if I subscribe to the Trends Stock Ratings and e.g. pick the Strong Buy stocks UARM and EMCI, for example, in a strong uptrending market, I'll be on my own to set limits in between the weekly updates? Any general rules to apply as I don't have access to your sophisticated limit setting software?
2. I noted that the Market Trend Portfolio added 3 new tickers. Will the actual price paid be reflected in the next update or will the 10-06 price be carried forward as the base price?

Thanks,

Ben

Mike's Response:

Hi Ben,

We generally do not change stops mid-week, but there may be (as you have seen this week) situations that warrant intra-week updates to stop loss settings. We may make intra-week stop loss updates to any of the 3 portfolios. Yesterday's bulletin was only for the Market Trend Portfolio.

Stop Loss settings are updated in the Portfolio Tool for the respective portfolio, only. Changes to stop loss settings are NOT changed in the Ratings or Analyzer database until the weekend update.

The stop loss calculation formula for the Stock and Option Portfolio is not the same as the other two portfolios, so if a stock is carried in the Stock and Option Portfolio, AND in another portfolio, do not expect the stop loss to be the same.

Our stop loss settings are based on our volatility formula and, as such, we do not have any general rules for intra-week changes to stop loss settings, other than your own desire to protect paper profits.

With regard to new positions, the actual price paid will not be reflected in the portfolio databases until we release the next update, the following weekend.

One more comment, Ben... I noticed that you used a phrase in your note to us, 'stop limit'. Although you may not have meant that literally, I wanted to address it as if you did.

We do not use 'stop limit' orders. A stop limit order is one that is triggered if a stock's price touches or falls below the stop limit price. However, the term 'limit' means you will ONLY accept your stop limit price. As an example, let's assume you own a stock that is trading at $30.00 and you set a 'stop limit' order of $25.00. Now, let's further assume that some bad news comes out on your stock after-hours and the stock opens the next day, trading at $24.99 then later falls to $15.00 then plummets all the way down to $1.00.

Since you have a 'stop limit' order, you still own the stock no sell order was ever initiated, since the stock never traded at $25.00. It traded at $24.99 and lower, but never traded at $25.00.

On the other hand, if you had used a 'stop market' order instead of a 'stop limit' order, your stock would have sold at or near the $24.99 level. Stop market orders tell the broker to sell the stock 'at market' as soon as the stock's price touches or goes below your stop market price. Stop limit orders tell the broker you will only accept as specific price for the stock.

We use Stop Market orders never Stop Limit orders.

Best regards,

Mike