Ask Mike:
Will you be rebuying WCG?

Question:

Dear Mike,

Will you be rebuying WCG now that it has pulled back to $80.71? Will you watch it to see if this is really the bottom? Or, are you done with it now? Just trying to understand your system.

Incidentally, great trade getting out at $93.00. Was that a sell stop or did you just get the feeling it was time to get out?

Thanks,

Peg from Lancaster, PA

Mike's Response:

Hi Peg,

WCG is now off my radar until it re-crosses (moving from below to above) my trend-line. Also, since it releases earnings in another week, we really don't know how strong the fundamentals are going to be or hold up.

My exit strategy, for any position, is virtually the same:

1. A calculated stop loss based on historical volatility.



2. The amount of paper profit (unrealized gain) that I have accumulated while holding the position.



3. And, the directional movement of the market, which can be the broad market as a whole, or a Sector or an Industry

When I made my decision that the risk level of a correction was high and I had a significant profit in WCG, I moved into a very aggressive stop loss strategy by using a trailing stop of just 10 cents. This meant that I wanted out of the stock because the paper profits were more important to me than the potential of the stock moving much higher in the future.

In retrospect, it was the correct call. They don't always work quite that well, but it is certainly great when they do. I generally make more money by stopping out early than waiting too long to hope to get a little more gain. Remember... no one ever made a dime by buying the right stock at the right time... you only make money when you sell the right stock at the right time.

I always have an exit strategy on every one of my positions.

Regards,

Mike