i read a great trick once that helps keep me out of trouble. if you look at a trend (any trend) and literally measure it - so say it is ie 10 inches long. if it pulls backe 2 inches (20%), the trend is still intact. 30% - still intact 40% " " 50%" " 60%+ - stand aside. from 5-50% pullback on a long entry - you wait for price confirmation before jumping in. ie - a reversal candle, doji, or bullish engulfing etc. if you use the bottom of your price confirmation candle as your stop - you can stay out of trouble pretty good. it works! best
Update, current prices (2/05): INFY -- 89.58 +3.03 ITW -- 79.53 +2.53 BDK -- 51.56 +2.07 CAT -- 78.01 +1.11
Where was your initial stop on CAT? Reason I'm asking is our style sounds similar, but CAT looked like a falling knife (more so than a pullback candidate) to me. Good call so far, though.
I don't use percentage or point stops. I wait for price to cross an EMA, or a time stop of 10 days if I have not reached my profit target, depending on the chart and my feelings for the stock at the time. While I take buying signals from a system, there is quite a bit of discretion as to when I sell.
At that point it is an Accumulation/Distribution issue. Herd stuff. You can watch the public looking for cheap deals. When an equity goes off the peak, look for a period of accumulation off the peak. Then, after that, distribution resumes if it is a true downtrend. The test to perform as it goes off the peak is an A/D test. You can also do a rally attempt analysis (WJO) when the intial conditions for the analysis present themselves.