Former Long Position -
SGR
Step numbers referenced below are referring to
Tutorial Steps.
If you need help with terminology refer back to that Step of the Tutorial or the
FAQs associated with that Step.
SGR is an excellent example of how Sell-Stops serve to limit
losses.
Action 1) - 11/9/03:
Step #1 - NYSE registers a Stage 3 - Bull Market.
 Step #3 - SGR flashes a Buy Configuration Signal
(click on Configuration
Chart, to the right). As we evaluate this stock, we observe the following traits
which cause us to add SGR to Professor Profit's Portfolio:
1) The configuration chart looks great;
2) the price level of the last couple of weeks appears to be a break-out
at levels higher than those of the last two hilltops;
3) The Risk
Corridor is acceptable ((Sell-stop (10) divided by Price (13.50)) minus 1 =
25.9%),
and;
4) Room for upside growth in price is tremendous with a 335% potential
for gain to the stock's historic high of $58.78 (May, 2001).
Action 2) - 12/28/03:
Step #4 - We declare
the 11/21/03 close a valley-bottom, even though we did not see three subsequent
increases to form the 10/31/03 hilltop. The significance of this move is
bringing the Sell-stop in line with the 30wk moving average. We adjust
the Sell-Stop to the 30wk level at $11 ($11.17 rounded down). From this point forward, Sell-Stops
are adjusted upward in $1 increments in tandem with the 30wk (see Action
History Chart, below).
Action 3) - 3/21/04:
Step #2 - SGR closed at $10.90 on Friday, March 19. Since this is
below our Sell-stop level of $11 this represents a Sell-stop violation. As it
is SGR's first Sell-stop violation, in a routine move to limit our risk, we
Sell half of our position. This first closing transaction of 2004 results in a
loss of 19.3%. Half of our original position in this stock is still
alive (see Action
History Chart, below).
Action 4) - 3/28/04:
Step #2 - SGR closed at $10.61 on Friday, March 26. This represents
the second Sell-stop violation on SGR and we therefore Sell half of our position. This
results in a
loss of 21.4% on this transaction, bringing the total loss on our closed SGR's
to 20.0%. One-quarter of our original position in this stock is remains open (see Action
History Chart, below).
Action 5):
Step #4 - Sell-Stop adjustments in tandem with the 30wk moving
average (see Action History Chart, below):
5) 4/18/04: 30wk = $12.08 rounded down to $12
Action 6) - 5/9/04:
Step #2 - SGR closed at $11.35 on Friday, May 7. This represents
the third and final Sell-stop violation on SGR and we therefore Sell the
entire balance of our position. This
results in a
loss of 15.9% on this transaction, bringing the total loss on our closed SGR's
to 19.0% (see Action
History Chart, below).
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