Stock Pick Update (Monsanto): Managing Postions

Stock Pick Update (Monsanto): Managing Postions

On October 24, 2008, In Money Management, Stock Picks & Tips, by Steve Warshaw

Before I get started on today’s topic, I thought I would review the trade so far:

Trade size – 100 shares
Trade opened short - 10/20/2008 at $89
Currently – 10/23/2008, stock price – $74.91
Profit – $15.09, or 15.83%

Posts About This Trade:

Managing Open Positions

There are many skills a trader must learn in order to take the most profit from winning trades. Learning to master your positions.

I have always found it odd how many people buy stocks, and enter and exit their entire position in 1 transaction each. As a trader, we should be able to define rules in which we can add to or subtract from our positions based on what the chart and the markets are telling us.

Today I decided to sell 1/2 of the position I purchased in my virtual portfolio. Here’s why:

First, today ws a perfect example of an opportunity to mange an open position without closing it out. Today saw the market swing from flat, to drastically negative, to a nice rally. While Monsanto was negative the entire day except at the open, it did trade in a very wide range as high as $80.50 and as low as $71.00. That’s over a 10% swing!

That combined with the recent market trend of 1 huge rally followed up by several smaller (but still large) down days, could give another excellent entry point to short the stock at a higher price. The difference this time is that this time, I’ll have the additional profits to reinvest into the trade should the plan workout. However, if for some reason today’s swing in the market somehow signals a change in market direction (I highly doubt it), I’ll have guaranteed that I took 50% of the profits in cash.

What I Did

Let me start by saying that I work a full time job. I am able to check stocks before the market opens and for about the first 45 minutes of trading, and again 30 minutes before the market closes. I checked on this trade and noticed that MON was trading in the middle of a wide range, and that the market had rallied considerably.

I had already considered selling 1/2 of the position on Friday because of the aforementioned rally and fade trend we’ve seen over the past few weeks. However, given today’s turn around, I belive it’s likely we may see a bit of a relief rally tomorrow, and a strong counter trend rally on Monday or Tuesday. This will make an excellent opportunity to reinvest my profits and ride this trade to the ultimate target.

The other 1/2 of the position has been left open, with the trailing stop set as mentioned in the tailing stock update that I linked to above.

Comments, Questions, Suggestions?

I hope you are finding this live trade example educational. I encourage you to post comments and ask questions. I’ll respond as quickly as possible to each and every comment.

Popularity: 1% [?]