PPR - How to handle DDD

Published : January 28 2013 at 13:25 ET

Three D Systems (DDD) and it's brother Stratasys (SSYS) both sold off on huge volume today on no apparent news at that time. Later in the day, some speculated it had to do with a negative article seen on seekingalpha.com about DDD. But the viewership to this article is small so may not have been the reason for the selloff in DDD.

No matter. The first rule of investing is to always obey your sell stops. If you planned on selling DDD on the basis of a violation of a moving average, then you might still own DDD even after today's big selloff. You might have kept it knowing that DDD can be quite volatile, so is subject to deep swings, especially after its big run up.

Recent climax action in DDD is not indicative of a climax top since stocks that exhibit such tops usually have been up hundreds of percents for many months. DDD, on the other hand, broke out of its base in April 2012, then more than doubled from there. 9 months and a 100%+ gain does not qualify as a climax top. It could, however, qualify as an intermediate top.

If it breaks below today's low in subsequent trading days, it then has violated its 10-day moving average. If you are using the 7-week rule, then you would sell on this violation, since DDD has obeyed its 10-day moving average for 7 weeks (this is the 8th wekk). That said, you might have sold part or all of your position based on today's big volume down day action in DDD. Using the violation of a moving average as your sell stop is fine, but you might want to sell sooner, especially if the stock is showing abnormal price/volume action. This comes down to your time frame, risk tolerance levels, and personal sell rules on such action.

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