We’ve had so many great trades already this year, but this could possibly be my favorite because of the many lessons it contained and underlined; the placement of a stop, taking an entry after a big breakout move, being prepared to let a winner turn into a loser by not moving our stop up too quickly, continuing to run a winner in the face of severe skepticism and extreme overbought conditions in a market that was weakening, and finally, being able to recognize when it’s over and take that exit with as much discipline and conviction as you entered.
We will be exiting at Monday’s open. As of today’s close we were up 50.4% on the position
TASER Intl ($TASR) +50.4%. Original 8/15 entry post here.
This has been a spectacular trade, and given its meteoric rise it perhaps shouldn’t come as a surprise that it ends this way. This week we saw some incredible price action. After opening on Monday at $14.61, $TASR climbed as high as $17.16 on Wednesday only to come crashing back down to touch $13.45 today before finally closing at $14.03. That is some volatility, and despite the fact it took out an ascending trendline from the 8/12 low, and the most recent pivot low close at $14.49, it’s that volatility via an ATR stop that has triggered our exit .
Trades like this are some of the hardest to run because they move so far so fast, it is extremely difficult in the early stages to place a stop that wouldn’t involve giving up a huge amount of gains, if not all. It is critical that you do however. It is very easy for bystanders with the benefit of hindsight to admonish trend followers for being ‘greedy’ for not taking profits, but $TASR is a classic example of why this thinking is absurd. You can never know where you are in the trend. The ‘profit takers’ would either have never taken the trade in the first place, as it was already overbought at new highs when we entered, but also would have surely exited in the first 4 weeks of the trade as it ratcheted higher day after day. Our exit signal, even after a steep decline from the high, is still above those levels.