FAQs Frequently Asked Questions
Q: Let's say a stock is obeying it's 10dma and then breaks below on a particular day. On subsequent days the stock does not violate the low of that break day and recovers the 10 dma. A week later the stock once again breaches it's 10 dma but does not trade below the low of the initial break of the 10 dma week earlier. Does this second break of the 10 dma reset your stop higher (to the low of the second break)? Is there some time period after an initial break where a second break that doesnt violate the low of the first break resets the stop?
A: The second break can reset your stop higher to the low of the second break but it is contextual to the overall chart. For example, if the stock looks as if it's moving in a sideways manner for a number of days or even weeks, you could use the low of the first violation as your sell guide.
Otherwise, you could sell half or all of their position when the stock closes under its 10dma for a second time, then breaks below that low. The rest could then be sold when the low of the first break is breached.
|First published:||28 Oct 2010|
|Last updated:||12 Apr 2012|