Friday, April 11, 2008

This is why you need stop losses...

Today was a bloody day all around and not something I needed to be around for. Let's examine what I did wrong:

I hesitated in setting a stop loss for Tessera at, say, $21. In my mind, if it bounced to $21 again, it was just going to bounce back up and I didn't want to miss the swing up and lose some money. Instead, it tanked right through its support to $20.29. Jesus. Each of those cents it dropped cost me $2. I'm down $206 on $4,058 worth of Tessera, because I didn't set a stop loss.

Tessera isn't dropping on any news. It's not dropping because of a loss of value or patent issues. No, it dropped, like just about everything else today, on news that GE fucked up and didn't hit their estimates. Because GE is such a far-reaching conglomerate and because they have some exposure to subprime with GE Capital/Finance, they double-whammied and took everyone down with them.

Since I want to be in Tessera *anyway*, this was a particularly painful lesson: I should have had a stop loss at $20.90. It would've tunneled right through that before landing where it did and I would've saved $122 of pain. I could've bought my 200 shares back at $20.90 and dodged that pain. But instead, I kept myself from establishing a decent stop loss. It's part art, part science to establish a proper stop loss that will keep me from exiting just as it's about to upswing again. But I needed one today.

Abbott started to dive and kept on going. I should've held off on purchasing ANY stock at the beginning of the day with something as significant as GE's news, especially considering how sterile ABT has been the past few weeks. I'm really hoping things bounce back Monday. I also need to examine stop losses to set now.

I also have a great deal more exposure with 200 shares. A relatively meager bounceback will bring this all back and a spike will boost me quite happily. I'm guessing and hoping TSRA makes it back into the high $21-$22 range next week, on no news.

Meanwhile, I'm still looking for a 19-day strategy. Ideas are welcome.

No comments: