Leading Off…

Tim Reazor
Chief Investment Strategist
Noram Asset Management

Well that was quick… CMG is now out of a buy range.  We’ve been talking about CMG for a few nights in my article.  After it rocketed up 12 points on 23% higher volume you now have to shift your focus to handling a winner.  I write every column in the evening – so the jobs report looms large tomorrow.  So, how should you handle winners when you have one in your portfolio?   Don’t let them turn into losers while giving them room to breathe.   I want you to deal in fact tomorrow, not fear or emotion.  With this I mind here are the facts about CMG.

The buy point for CMG was around 561.  The disciplined investor doesn’t chase and uses a 5% buy range to contain risk and maximize buying power.  CMG’s buy range takes you up to 589.    Here is the fact to pay attention to… 50% of the most fundamentally & technically sound stocks will gravitate back towards a buy range.  That 50%!! So what does this mean? How should you use this information?

You need to give your stocks room to breathe.  If CMG starts falling in high volume protect your profits – but if CMG dips on low volume you’re to assume that this is natural profit taking.  Make sense?   There’s a 50% chance that CMG will try to drift back to its natural buy range.  The key in knowing when to sell or hold is found by looking at the volume percent change for the day.  A high volume rout is a clue to get out.  Low volume = stay the course.

Now, the overall markets supersede all of this – if the markets become pressured and start to correct you’ll want to protect profits and sell any laggards.  Why? Because 75% of stocks follow the general market’s trend.  How will you know if the markets are in danger… follow me on twitter and read my next column.

So, are you asking what about Monday?  That was a serious dip.  The key was volume.  The markets fell on low volume – so who was selling?  Panicked individual investors – and being panicked i.e. emotional is never a way to approach the markets.

If you have any questions about my approach or simply want help with your stock and options trading let me know.  I’m always available by email or Twitter.  Tim@NoramCapital.com or @TJReazor

Best Regards,

Tim