Thursday, April 29, 2010

Bookkeeping: Stopped Out of 60% of Bucryus (BUCY)

One of the principles of buying stocks on dips (near support) rather than chasing momentum stocks ever upward is you are often stopped out as the dip does not stop at the moving average. Usually there is at least one bounce off support - which is what happened after our purchase of Bucryus (BUCY), but in this case the bounce failed, which happens at times. So from here my standard operation procedure is to cut back exposure on the initial break of support and watch what it does with less on the line. If the stock quickly recovers we can continue the position; if not we are forced to exit and revisit another time.

I had not noticed until this morning but my stop loss for Bucryus triggered in the mid $65s, versus entry point of mid $68s so with 60% of the position I've been stopped at a 4%ish loss. I'll probably give the other 40% one or two more days and that's it, because it would be doubtful to see a break of support like this and then a reversal right back upward.* There is some support around $63 from mid March, so if that is broken it's probably a sign that HAL9000 has moved away from the stock.

*Caveat - it used to be rare, I've seen it happen a lot the past 13 months.

Long Bucryus in fund; no personal position


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