Imagine turning every investment decision into a stepping stone towards financial mastery—ready to unlock that potential?
Imagine watching a stock not only meet your expectations but exceed them. That’s what happened with my CNM position on May 7th, 2024, when I decided it was time to double down. Why did I choose to add more shares on the rise, and how do I manage risks and rewards? Let’s dive in.
Why Add to an Existing Position?
Have you ever watched your favorite sports team pull off a comeback that was so thrilling, you couldn’t help but cheer out loud? That’s a bit how I felt about CNM’s performance in my portfolio. On May 7, 2024, when I saw CNM had risen more than 2%, I knew it was time to act. But why add more to a winning position? Isn’t that just tempting fate?
In stock trading, sometimes the best move is to double down on your winners, especially when they show signs of ongoing strength. In the next section, I’ll explain how I manage the risks when I decide to invest more.
Managing Risks and Setting Goals
And how do I handle the potential downside? After all, investing more in a stock already performing well can feel like stretching your luck. I set a tight stop-loss at $58.21, just a bit below my buy-in price, to cap potential losses at a palatable 2.22%.
Managing risks doesn’t stop there. I also set a profit target to ensure I know when to take my gains and run. Setting clear goals helps me sleep at night, knowing I won’t miss out on profits or let losses run too deep. Wondering how this looks in a real-world scenario? Let’s take a closer look in the next section.
Details at a Glance
Explanations for the Drawing
The upward purple arrow shows where I bought the stock. The downward purple arrow shows where I sold it.
Green Line 21-day exponential moving average line (see EMA 21 below)
Red Line 50-day simple moving average line (see SMA 50 below)
Black Line 200-day simple moving average line (see SMA 200 below)
Let’s break it down:
- Date of Additional Purchase: May 7, 2024
- Price at Purchase: $59.54
- Stop Loss Set At: $58.21
- Risk of Additional Buy: 2.22%
- Current Portfolio Share: Exceeds 10%
These figures guide my trading decisions and keep my strategy disciplined. But what do all these terms mean? Let’s decode some jargon in the upcoming section.
Terms and Definitions
Ever felt like trading lingo was designed just to keep amateurs out of the loop? Let’s simplify a couple of terms:
- Stop-Loss: An order to sell a stock when it reaches a certain price, minimizing losses.
- Extended: When a stock price is higher than its usual range, often prompting caution among investors.
- EMA 21 Calculates the 21-period exponential moving average, highlighting short-term trends.
- SMA 50 Averages the price over 50 periods, showing medium-term trends without overemphasizing recent data.
- SMA 200 Averages the price over 200 periods, revealing long-term trends by treating all data equally.
- Pivot price is the optimal buy point of a stock is defined as the moment it transitions from a stable basing area or chart pattern and begins to achieve new highs in price.
- Industry Rank Investor’s Business Daily’s system that ranks industries 1 to 197 based on performance. It guides us in CAN SLIM TRADING towards leading sectors.
- U/D Ratio Measures stocks closing up versus down. A ratio above 1.0 indicates bullish sentiment, important in CAN SLIM TRADING.
- RS Rating Ranks a stock’s performance on a 1 to 99 scale. I look for at least 85, showing strong momentum and growth potential.
- RS Line Compares stock price to the market, plotted as a ratio. We seek an uptrend, indicating outperformance and strong momentum.
- Volatility Measures how much a security’s price fluctuates over time. High volatility means large price changes, indicating risk and potential reward.
- Institutional Ownership Trend indicates whether the stock is under accumulation or distribution by the institutions
Conclusion
Adding to my CNM stock wasn’t just about capitalizing on a winning ticket; it was a calculated decision based on thorough analysis and a clear strategy. Whether the market climbs or falls, I’m prepared. And isn’t that what makes trading such a thrilling ride? Now, what will your next big move be?
If you have any questions about my strategies or tactics, fill out the form here and I’ll get back to you.
