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Oct 09

Exiting Long $MCHP, $LMT, $DDD, $FLT, $PRLB

We got 5 more trailing stops hit at the close today which we’ll exit at Thursday’s open. As of today’s close they had the following returns:- $MCHP +8.4%, $LMT +15.4%, $DDD +1.0%, $FLT +18.3%, $PRLB +11.3%.

Here are the signals:-

Microchip Technology ($MCHP) +8.4% (incl 5/16 div $0.353, 8/18 div $0.354). Original 3/5 entry post here.

Given the length of time we’ve held this, it hasn’t been that great a performer and it’s been fairly volatile along the way, so although this is only a marginal break of our trailing stop I’m happy to step aside and move on.

AlphaCapture

 

Lockheed Martin ($LMT) +15.4% (incl 8/28 div $1.15). Original 6/12 entry post here.

After threatening to breach our stop last week, $LMT has held up relatively well in this week’s market selloff, but today’s break, although marginal is still enough to trigger our exit here.

AlphaCapture

 

3D Systems ($DDD) +1.0%. Original 7/11 entry post here.

$DDD took a long time to fulfill the potential its breakout setup suggested, but gave it back all too readily this week. It recovered off its worst levels today with the market, but that break of our stop and the 50-day is enough.

AlphaCapture

 

FleetCor Technologies ($FLT) +18.3%. Original 7/22 entry post here.

Another name that has seen only a marginal break of our actual price level today after recovering strongly, but that’s a brutal move over two days triggering an ATR stop, and we’ll happily take our profit and step aside.

AlphaCapture

 

Proto Labs ($PRLB) +11.3%. Original 7/22 entry post here.

A similar situation to $FLT, in fact we would have entered and exited both positions at the same time. It can be argued this still has its longer-term trend but these ATR and trailing stops are there to protect us and we’re out.

AlphaCapture

 

 

 

 

4 comments

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  1. Adam

    How often do you see a purge like the one the last few days? Think is is preceding a deeper correction or perhaps it’s just a rotation into new leaders/sectors?

    1. Jon Boorman

      We’ve had a couple of periods like this earlier this year, but a lot more signals triggered this time because we had already been consolidating for a while before heading lower so all the MA’s caught up to current action and previous pivot lows. Easy to run stops in that environment. The move has only really appeared significant in our individual stock names, the futures haven’t really seen big moves yet.

  2. Adam

    I decided to look back at this and the previous two posts, LNKD exit and the $QIHU, $KORS, $BCR, $SSNC, $ILMN, $GMCR, $ICON exit post. The performance for every single stock save GMCR has been positive. It’s fair to say that LNKD has gone nowhere and that 3 or 4 stocks have had only small gains of under 5%, but the vast majority seem to have gained quite a bit. Some as much as high 20s percentile.

    What I’m trying to figure out is what it all means and if there’s a way to avoid missing out on this kind of upside in the future. My working thesis is that any stop can be violated at will with enough institutional selling, but that short term dips when the whole market is under pressure might grant an exception based on the idea of a mean support-level reversion.

    http://imgur.com/zeLeFMR – This is several of the holdings and how they behaved the following 5-7 days after exit signals. They are almost telegraphing their behavior for the next three weeks.

    You fielded a couple questions and replied to an article about getting back in a stock when it reclaims it’s 50-day (it was on twitter so I don’t have the link handy), your response is the systematic “it would have to do more to get me back in it” sort of thing (not mocking at all, one needs that discipline).

    However, if one had gotten back in the stocks that moved back above their original stop within a 4 day period, they’d risk a little (though only about 1/4th of a normal entry), and it would have paid off, at least so far. All these names, could yet take another dive through your original stop, but given that this is sort of a playing the odds type of deal where really only 2 in this case, maybe 3, would need to run in order to make the overall strategy profitable, it seems worth of some consideration.

    1. Jon Boorman

      “The performance for every single stock save GMCR has been positive.”
      Well, you’re using what happened since to determine whether the exit was successful or not. If that’s the aim then why judge it on where it is today, what about 1 day after, or 3 days after, or 3 weeks, or 3 months, or 3 years, how long is long enough, when does it no longer become relevant to keep measuring it? If GMCR now recovers and goes to new highs will the one stock you’ve said was a good exit now be a bad exit? How long before that could change back? The exit is the exit. THE TRADE IS OVER. What happens afterwards doesn’t impact whether the trade was successful or not, only what happens during the trade itself determines that. The idea that after every long exit the stock should continue to go down in order to be a ‘good’ exit is a faulty one. If that were possible it would make more sense to use it as a short entry, not an exit signal. But it’s not. I have no idea where it’s going after I exit, but if it sets up again with a good risk/reward I’ll re-enter no questions asked, and without regret.

      “What I’m trying to figure out is what it all means and if there’s a way to avoid missing out on this kind of upside in the future.”
      There is. It’s called ‘buy and hold.’ It guarantees you get all the upside. Oh, and all the downside.

      “given that this is sort of a playing the odds type of deal where really only 2 in this case, maybe 3, would need to run in order to make the overall strategy profitable, it seems worth of some consideration.”
      I could do that, but then I wouldn’t be trend following, I’d be doing something different designed to placate some fear of missing out on future gains (which I don’t have.)

      Everything you are doing here is optimizing. You’re going back, looking at where the system got out, seeing how it could have somehow been better using some if/but/maybe adjustments to come up with what would have been perfect for THIS particular market and these particular trades, ignoring the fact that these are just a handful in a series of many thousands. Optimization is fatal to any system. The system is what it is. The average gain for all the winning trades this year is around 20%. I’m happy with that and how it fits into an overall model in the long run. I don’t need to go back and see if it couldn’t have been 30% or 40% and turn that screw so tight that it breaks and becomes useless.

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