Thursday, March 12, 2009

Acapulco Cliff Divers

Well, it is one thing to see them in Acapulco, and it is quite another to see them in you portfolio. Here's my diver, who goes by the name of WH

I don't have a stop loss. Personally, on thinly traded stocks, you can get shaken out easily enough. I'm still long, but I'd be lying if I said that the 34% decline wasn't a wee bit painful.

The chart is also a useful example of how seeming support, once broken and aid a abet a rather sizable downfall. As support was rather easy to see, I'm confident that there were alot of stop losses sitting around it. Accordingly, once obvious support is broken it triggers a cascade of sell orders that result in the picture you see above.

A stop loss order does not help you in these instances. I have found that it's best to watch the chart and be willing to endure a hit if support is broken or sell and re-enter when the stock's action is more constructive.

2 comments:

Anonymous said...

so it took your diver 2 weeks to get out of the water and climb back up the cliff (WH = $3.66 today). Now that you're roughly "even", do you send him home, or let him jump again?

~Sleepless

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