Rule One Investing Blog » Sell

Apple (AAPL) Shares Sold After Indicators Break Through

admin — Thu, 10 Dec 2009 18:49:54 +0000

On December 4th, 2009 I sold my 4 shares of Apple (AAPL). I was watching the indicators ever since it broke through the $200 threshold. I had this as my target price for a while and have been watching and waiting. Then on December 2nd it started to go down and I watched closely to ensure I wasn’t getting out too soon or too late.

The indicators I used to get out were the 20 day moving average, 50 day moving average and the MACD. I also was watching two versions of the charts the 3-month view and the 1-yr view. I’ve noticed that they provide different information and I like to have as much information as possible. I saw the 20 day moving average break through the price around November 30th, then the 50 day on Dec 3rd / 4th. The MACD was trending downward and hadn’t quite crossed but was about to. Anyway, I sold at $193.

Bought 4 shares @ 129.10 = $516.40 (February 29th, 2008)

Sold 4 shares @ $193.00 = $772

Profit = $255.60

Looking back at the trends over the past 1.5 years (chart below) I noticed that I should have sold my stocks original in July 08. Then I should have waited until March 09 to buy again. This would have been a correct Rule 1 trade, however, I wasn’t following things closely enough and missed out. This teaches a good lesson that watching the stocks does only take 15 minutes per day and you can profit greatly if you know what you’re looking for.

I am now in search of another set of companies to purchase. However, as my Rule 1 knowledge is a bit foggy I am going to re-read the book and refresh my knowledge so that I’m ready for my next set of winning trades!

Analyzing my first two trades

admin — Fri, 08 Feb 2008 04:47:48 +0000

Since selling my Lowes stock I’ve been searching for another great company to buy. However, since I’ve completed my first two trades I thought a little reflection is necessary.

First off, don’t get me wrong I’d love to own Lowes (LOW) forever. However, the big guys are weary about this industry right now. This is because of the weakness in the housing market in the US. Therefore, the money is coming out (or is out) so my money is out too. As I discussed in my last post selling Lowes. I figured that looking at a chart to see if I used the technical indicators correctly would be smart. I plotted a chart with the SMA, MACD and Slow Stochastic below. This chart is from February 7th, two days after I sold the stock.

As we can see from this graph all the indicators have actually trended downwards. The MACD is just starting to cross downwards, the slow stochastic has pass downwards and the SMA has crossed the stock price. This demonstrates that I got out at the correct time, therefore, minimizing any losses and thus maximizing my gain. It could be argued that maximizing my gain would be to get out at the top of the spike but I had no sign that the stock wouldn’t rebound.

Now let’s look at my other stock trade which I discussed in analyzing coldwater creek. In this article I discussed purchasing the stock because of the low price and that the stock was under the margin of safety. Furthermore, the chairman is buying back stocks, which is usually a positive sign. So, I purchased 25 stocks at $6.20.

Upon discussing this at a forum, roicommunity.com, a poster pointed out that I might have entered too soon. Meaning that the stock might be trending sideways for a while. Therefore, I won’t see any increase in the price of the stock (possibly for a while) and therefore my money would be tied up and I won’t be able to use it at other places. By the chart posted below I can see that this poster might have been correct. The technical indicators are tough to judge at the moment as the price seems to have crossed back over the average but the MACD and the slow stochastic is under. I’m guessing this is a sign of a sideways sliding stock.

That being said, I still believe that this company has a large potential of increase and I won’t be surprised to see a $12 (or higher) price sometime this year. That would be a great return on investment. Therefore, I’m leaving my money in the stock and trying a buy and hold strategy with this stock. In fact, if it decreases below $5, I’ll consider increasing my position.

Well, it’s a good learning process so far. Now I just need to find the next undervalued company. In the meantime I’m growing my cash in order to take full advantage when I do find the undervalued stock.

Sold LOWES – small profit

admin — Wed, 06 Feb 2008 05:37:48 +0000

I’ve been watching the technical indicators carefully since analyzing and buying Lowes (LOW) stock. It’s not that I’m super worried about my calculations as my sticker price is in the range of $32-42. The stock is no where near these values, however, the market is so volatile right now that it could drop quickly and for no real reason (good old Mr. Market).

Anyway, today I received the signal to sell. To determine when to sell I’ve used the following tools:

10 day simple moving average
Slow Stochastics
MACD (with 8, 17 & 9 as my settings)

Looking at the chart below we can see that all three symbols are trending downward today.

So, I followed the Book Rule #1 advice and sold. I’m now waiting and watching the symbols for them to tell me when the big guys are getting back in.

Sold – 25 shares @ $24.60 = 615 – 9.95 (trade fees) = $605.50
Total Profit = $605.50 – $567.45 = $38.05