Wednesday, January 13, 2010

Bookkeeping: Adding Another Layer to Telestone Technologies (TSTC)

After an uncomfortable drop to the $19s this morning, Telestone Technologies (TSTC) has bounced back to mid $20s where I'll layer in another purchase, adding an 0.8% allocation - this will take us to just over a 2.1% allocation in total - as we said yesterday we were taking this one slowly. 

So for the first time in over 2 months this teflon stock broke the 10 day moving average. In fact it looks like it potentially could fall to the 20 day. For now I'll make a 1.4%ish purchase to get back what we sold in the $23.80s at $21.03. So not only were we able to lock in a very quick 21% gain on our original purchase, we have been able to get back in at a 12% discount to our sale price - a week later. Certainly the stock could visit under $20.50 ...

I did not buy in the $19s because support had been broken intraday and this stock has run so far so fast there is a huge gap between the 20 day and 50 day moving averages (the latter found in the $16s).  The potential existed for a much larger drop but as of noon-ish the stock seems to have found buyers.  I will feel much more comfortable if the stock holds $20.40 at the close today.

These type of names, after such enormous moves - are prone to quick and hectic selloffs which are sometimes difficult to stomach but as long as you don't have a portfolio of 15 such stocks it's a bit easier to sit through.  That said seeing any stock drop from $23s to $19s in 2 sessions is always interesting - thankfully our "re-entry" yesterday was just over $21 so it wasn't quite the same drop as others experienced.  But yet another example of why even with the "hottest" stocks, it is worthwhile to trade around a core position - even if you leave some upside on the table.  In this case we happened to be fortunate to exit almost the entire position at $23.80 (even though the stock ending up running to $25 the very next day)... if we had not done that all our gains would of disappeared in a matter of 72 hours.

Long Telestone Technologies in fund and personal account

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