If one buys a stock at $30.90 then it drops to $30.00, goes to $31.00, goes to $29.00, to $31.38, to $30.50, but does not advance much over the purchase price, or just stays a bit below it. For how long does one hang on to such a frustrating stock, after all the indicators said it was a good buy? 2 days, 2 weeks? (June 23, 2001)
If the play is a breakout play from a solid pattern but then just hems and haws and goes nowhere, we will consider exiting the play. After all, we were looking for a strong breakout move, and if the move stalls out in a hurry without making a decent advance, it may not have the interest from the institutions to make a strong move. In that case, we exit the play more often than not and look for better game while keeping an eye on a stock that still looks good but just may not be ready. Many times the overall market has something to do with that: a stock looks great, starts to make a move, but the market is topping near term or otherwise softening, and that stops the move for awhile. Many, many times we will see a stock start to move up in its pattern and the market decides to take a breather and the stock does the same. Then it bounds on out of the base when the market has its next good session. If the stock is still good, and if you would buy it again, then we will stay. If it has not made the move we want and we would not buy into the pattern at that point, we will get out.
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