Former Long Position -
TECD
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.
TECD is an excellent example of how Sell-Stops serve to lock-in profits.
Action 1) - 7/27/03:
Step #1 - NASDAQ registered a Stage 3 - Bull Market.
 Step #3 - TECD flashed a Buy Configuration Signal
(click on Configuration
Chart, to the right). We executed the Buy. Initial Sell-Stop is established off the
valley-bottom resistance points which are below the 30wk moving average. Risk
Corridor is slightly above the ideal range (but tolerable) at 23.9% (see Action History Chart, below).
Action 2) - 11/16/03:
Step #4 - This is one of those rare exceptions - We are declaring
the 9/19/03 close a hilltop, even though we have not seen three subsequent
decreasing closes for confirmation. We feel comfort in doing this because we
believe we see a valley-bottom as depicted by the closes of 9/26 at $31.72 and
10/24 at $31.14. We believe this double-valley-bottom is confirmed by the third
subsequent increase in price which occurs as of market close on 11/14/03. Since
the double-valley-bottom is above the 30wk moving average, we adjust
the Sell-Stop to the 30wk level at $29 ($29.81 rounded down). From this point forward, Sell-Stops
are adjusted upward in $1 increments in tandem with the 30wk (see Action
History Chart, below).
Actions 3) through 10):
Step #4 - Sell-Stop adjustments in tandem with the 30wk moving
average (see Action History Chart, below):
3) 11/23/03: 30wk = $30.04 rounded down to $30
4) 12/14/03: 30wk = $31.29 rounded down to $31
5) 12/28/03: 30wk = $32.27 rounded down to $32
6) 1/11/04: 30wk = $33.26 rounded down to $33
7) 1/25/04: 30wk = $34.25 rounded down to $34
8) 2/8/04: 30wk = $35.08 rounded down to $35
9) 2/29/04: 30wk = $36.07 rounded down to $36
10) 3/21/04: 30wk = $37.03 rounded down to $37
Action 11) - 5/2/04:
Step #2 - TECD closed at $34.06 on Friday, April 30. Since this is
below our Sell-stop level of $37 this represents a Sell-stop violation. As
this is the first Sell-stop violation we have experienced with TECD, in a routine move to limit our risk, we
Sell half of our position. This transaction results in a gain/positive ROI of
12.6%, locking-in an annualized rate of return of 16.5% on the portion sold.
The other half of our original position in this stock is still
alive (see Action
History Chart, below).
Action 12) - 5/9/04:
Step #2 - TECD closed at $34.45 on Friday, May 7. Since this is
below our Sell-stop level of $37 this represents a Sell-stop violation. As
this is our second Sell-stop violation with TECD, we
Sell half of our existing position. This transaction results in a gain/positive ROI of
13.9%, bringing the total ROI for TECD to 13.1% on the portions sold.
The other one-quarter of our original position in this stock is still
alive (see Action
History Chart, below).
Action 13) - 5/16/04:
Step #2 - TECD closed at $33.55 on Friday, May 14. Since this is
below our Sell-stop level of $37 this represents a Sell-stop violation. As
this is our third and final Sell-stop violation with TECD, we
Sell the entire balance of half of our position. This transaction results in a gain/positive ROI of
10.9%, bringing the total ROI for TECD to 12.5%, locking-in an annualized rate of return of
16.1% on the entire original position (see Action
History Chart, below).
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