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Oct 04

Exiting Long TASER Intl ($TASR)

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 .

AlphaCapture

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.

 

 

 

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  1. Keith

    Yes it was indeed a great trade! I exited today two hours into the action. I thought about your approach of waiting for the close but I didn’t want to risk another double digit drop.

    I found your blog the night before you took this trade and I decided to follow suit. Thank you for my own 50% gain! It’s only lately when I ride stocks like TSLA and TASR that I realize these MUST be the leaders O’Neil and other seasoned traders keep talking about. It just feels different.

    Now perhaps these are the exception and I’ve just been lucky or it’s been a lucky year but I do hope I’ve experienced true momentum — to help me pick & hold future winners but also allow me to recognize sooner when a trade is not doing what I had expected and get out at the planned area instead of essentially holding on and wishing when my capital could be put to better use.

    Thanks again
    Keith

    1. Jon Boorman

      Excellent, well done Keith.

  2. Ulrich

    I entered the trade based on Jon’s weekly watchlist at the close on 8/14 and exited on yesterday’s close for a 53% gain, when the pivot low was broken.It was an interesting experience to just let the trend run its course and to trust that I just need to wait for the exit signal based on the rules I set. This concept kept me from cutting my gains short at the end of August. I think I am slowly starting to get a hang of this – still a long way to go, however…

    Thanks Jon for letting us participate in your ideas and thought process. It is great education!

  3. Jim

    I know you mentioned on Twitter there are various reasons why selling at open the following day is superior. Is it possible to elaborate on why that is the best way to operate?

    Not knowing otherwise, it seems like buying and selling at open leads to a bit of chaos with spreads being large, especially on some positions that sometimes do not even trade more than a few thousand shares for the first ~15 minutes. By no means am I claiming I am correct, would just love to learn why selling here is the best option.

    1. Jon Boorman

      From my performance tab:-
      “When I post about entering a trade, if it’s before that day’s open, we will get the open. If it’s during the trading day, or after hours, we will get the next day’s open. When a closing price triggers a stop, we exit at the next day’s open. Closing stock prices trigger entries and exits, and all trades are then executed at next open. I do this for two reasons. It makes it very simple for me to run as a system, it means I don’t have to spend time during the day watching every tick fretting about whether or not I’ll be stopped, or how I might communicate any action necessary. It also makes it easy for you to follow my progress, and most importantly, ensures the entries, exits and performance I show here will be the very same as those achieved by you. It is actionable, measurable, and achievable.”

      In addition I have had some people comment they have found a marginal benefit in testing to have a next-bar-open exit. If it’s something that’s not practical for you then you should adjust it accordingly, but I don’t believe we’ve ever traded in anything so thin that exiting at the open has caused a problem.

      1. Jim

        What do you mean by a next-bar-open exit? Tried finding answers online, but couldn’t find a great response.

        1. Jon Boorman

          The open of the next bar on a chart. If looking at a daily chart, the next day open.

    2. Jon Boorman

      Our exit proved to be a good example of that next day effect, with TASR opening up 1% while the market was down heavily.

  4. Gaurav

    Jon,

    Is your ATR stop calculated as 3*21 day ATR .. Also How do you determine when to use a 25 day low (as u used for lnkd), ATR stop, moving average or trend line. Is your stop the lowest of all these stops.

    Appreciate the great wok on your blog. Its very educational.

    Thanks,
    Gaurav

    1. Jon Boorman

      It can be any or all of the above or something of your own. You have to do what’s right for you, not what’s right for me. For me, a moving average on its own would never be the reason to exit, but it can coincide with something else (as it often does) say a break of a previous support level/price point/pivot low, like with LNKD. An ascending trendline on its own would never be the reason to exit either, but again if it coincided with those other events it carries a lot more significance. Price itself takes priority over measures of price. If your ATR is large enough it should be the one that gets hit the least, you will find it might get used on something that moves very far very quickly like TASR, QIHU, or TSLA, as the MA’s and trendlines would be well away. See how 3*21 looks for you, does it take you out when you would’ve said the trend isn’t over, probably. Try increasing number of days, 50, 100, get a feel for the difference and look many examples, then experiment with 6 ATR, or even 12 ATR just for fun. It really helps give you a feel for what your timeframe should be.

  5. Gaurav

    Thanks .. Appreciate the quick reply

  6. Ernie Cooper (@ErnieCooper1)

    I learned a lot as well. I entered when you did after your entry post, but I didn’t have the conviction to say in. So I did well but not near as well as I should have. My key problem was I didn’t have a plan; I didn’t have a stop in mind so I basically sold the first day of weakness. Lesson learned, and I actually made money that lesson :). Thanks for you all the information you share, its great information on how to think about trading.

  1. EXIT $ACHN » Stockroads

    […] did not lose all our profits, again. On due analyses looking at our Guru John Boorman, we found a similar circumstance in $TASR . The Analysis showed that when a stock goes up so fast , it loses momentum and comes down just as […]

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