ANSS...nice call...bought the stock today @ 16.32. Read your comment to buy @ 17.08 on 176,000 shares. Huge volume today in excess of 300,000. My question: you have a target of 20. Do you wait 'til 20 to sell? Or do you take partial profits here? I don't know how you guys handle a breakout. Does the stock more than likely have to retest the breakout level, which in this case is 16.95? Input would be much appreciated. Also, related question: many times you have the stock a buy "on the breakout" to a certain level BELOW your target. Does that mean you sell the stock at that level regardless, or is it just a level at which you no longer want to buy the stock because the risk/reward is not that good? (June 30, 2001)
Thanks. ANSS had a great move that we could not resist either. The stock raced almost to our initial target in one session. Strong moves like this can lead to some selling early the next session as the market maker was selling stock like mad at the close and will most likely need to replenish his inventory. He might open it down to get some sellers so he can buy, and then if the buyers are still there, send it right back up. If it moves back up over the previous close on strong volume still, that is bullish. At this point we are inclined to let it run to see if it will hit 20 and keep on trucking. If it stalls there, we have choices. We can ride it down to see if the test is successful, we can sell out here and then pick it back up if it starts to move higher again after a successful test (we can lock in a gain and then pick it up again for a potentially bigger advance), or we can sell half our position, let it test, and then decide if we want to buy more or not if the test is successful. This was a huge move in one session. Stocks that move 20% on a breakout can be big winners, but Friday was a bizarre day. We anticipate somewhat of a test after such a strong move, but we do not anticipate it to come all the way back to the breakout.
As for the 'buy up to' language, that refers to the fact that in most instances we don't like to chase a stock on that initial move 5% past the breakout point. If it gets away from us, we will wait for that test and then pick it up. If it tests and then moves up over that first breakout high, that is another buy point as it has already tested and is ready to move higher. In other words, it has proven itself and the 5% limit is no longer applicable.
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