The Right Stock At The Right Time®  
 
Subscriber Login
User ID:
Password:
Remember My Account
Stop "Remember My Account"
 
Forgot Password?
Technical Analysis
Enter Symbol:

Second Opinion
Performance

Video Tutorials

Subscription Rates

About Computrade

Contact Us

User Agreement

Privacy Policy



 

Dr. Market Edge Says Back to Education Institute

Placing Protective Stop-Loss Orders
Use cyclical analysis when determining proper stops.

The best method to determine the location of a protective stop-loss order is derived from cyclical analysis. Long positions are protected with sell-stop orders (GTC) based on the previous cyclical low while short sale positions have buy-stop orders (GTC) based on the stock's previous cyclical high. Locating the most recent previous cyclical low from the time a position was originated and deducting 1/2 of a point produces the sell-stop. In the example below, the initial sell-stop for a long position initiated for Aetna (AET) in mid-January would have been 46.50.

Stops should remain unchanged if the price of the stock moves lowers. However, as the price of the stock moves higher, the stop should be adjusted upward. The following chart shows the proper placement of sell-stop orders as AET moved up in price over the January-April time frame.

Locating the most recent, previous cyclical high from the time a position was originated and adding 1/2 of a point produces the buy-stop for a short sale position. The chart below shows the initial buy-stop at 53 for a short-position in General Motors (GM) opened in mid-September @ 50. As GM sank, the buy-stop orders would have been adjusted down to 41 as the stock traded down to the high 30's.

This technique of determing protective stocks is far surperior than the random percentage method. Cyclical analysis takes into effect the volatility of the stock as well as pinpointing significant areas of support or resistance that if violated typically point to a trend reversal. Neither of these factors are considered when simply using a 10% stop. Market Edge computes buy and sell stops based on this technique and includes them on the stock's Second Opinion report.

 

Do you want the very best in both fundamental and technical research?
Market Edge® integrates S&P research and commentary with the best stock timing product available - Second Opinion®. With Market Edge you really do get The Right Stock at the Right Time!
Click here to subscribe and receive 14 days FREE!
Click here to tour Market Edge.
Back to Education Institute

 

Past performance is not a guarantee of future results. The data contained in Market Edge is obtained from sources considered by Computrade Systems, Inc. to be reliable but the accuracy and completeness thereof are not guaranteed. Computrade Systems, Inc. does not and will not warrant the performance and results that may be obtained while using the Market Edge research service.
The Market Edge research service & Second Opinion are neither offers to sell nor solicitations of offers to buy any security.
Company profile, estimates and financials provided by S&P Capital IQ.
See User Agreement for other disclaimers.
Market Edge and Second Opinion are registered trademarks of Computrade Systems, Inc.
© 2016 Computrade Systems, Inc.
© 2016 The McGraw-Hill Companies, Inc. S&P Capital IQ is a division of The McGraw-Hill Companies, Inc. See full Copyright for details.