Inspired by Bill, Trader X, and Ugly, I have decided to discuss trades I have made. These early trades were made as an educational endeavor to understand buying and selling of stocks using minimal amounts of capital. For the most part I bought and sold these shares as I developed my investing and trading process.
Selection
PETM was a stock I bought as an idea on a undervalued growth company. The main reason for purchase was just to get my feet wet and I felt PETM at that time was undervalued enough to present with a sufficient margin of safety that would preserve my capital. So I bought. And then I sold.
Results
On February 16, 2006, I bought PetsMart (PETM) at $25.99. As usual I cannot say that there was any particular signal that stood out at that time due to my newness, so again I would describe it as a random entry as discussed in Trade Your Way to Financial Freedom.
On June 12, 2006, I sold PETM at $26.34 (which includes the .03 cent dividend paid in April). I had a gain of $0.35 a share or just about 1.3% in 116 days. Measured as R, my gain of $0.35 was 0.18 R. Why did I sell? At that time I cannot say I had any real reason to sell. I was not nervous or anything. I simply though I had a better investment I could use the money to buy.
Looking back with what I know now, the Average True Range (thanks Bill) was $.63 and therefore my R was $1.89 (understanding why R is important comes from Trader Mike). Based on that, my initial stop of 1R should have been $24.10 and a 1R target of $27.88. Following the chart at Yahoo
It is clear, in hindsight, that PETM never came close to hitting the initial stop after I purchased. Looking at the Yahoo chart PETM hit a high close on May 10, 2006 of $29.18. Using a stop I would have exited at $27.38 on May 17 at the close. A stop would have resulted in a gain (with dividend) of $1.42, or 5.4% in 90 days. Stated as R, I would be up .75R.
Bottom Line
Once again I had a entry which, had I used a strict stop, would have resulted in a better gain than I actually realized.
Tuesday, January 09, 2007
Trade Review: PETM
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2 comments:
I have a web site where I give advise on penny stocks and stocks under five dollars. I have many many years of experience with these type of stocks. If their is anyone that is interested in these type of stocks you can check out my web site by just clicking penny stocks. I would like to take a moment to talk about low price stocks not classic penny stocks or stocks under one dollar the term most people most often think of when the word penny stock is used. Their are companies of really decent quality trading under five dollars’ but for every one company trading under five dollars that is of decent quality their are maybe ten of poor quality. So the really big difference between those investors that are tremendously successfull when it comes to investing in low price stocks and those investors that lose enormous amounts of money investing in stocks under five dollars’ is having a great deal of knowledge and experience when it comes to low price stocks’ or having a total lack of knowledge and experience when it comes to low price stocks. Finding quality stocks under five dollars requires a lot more research than finding a decent stock above ten dollars.
Petsmart is a good company.
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