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PPR (Pocket Pivot Review)- CRM- should it be sold?

We do not always comment on when to sell stocks we have recommended, since selling depends on many variables that are personal to each investor such as time horizon, risk tolerance levels, the percentage exposure of their portfolio to the stock, and diversification preferences. Some prefer to use the 50dma outright as their sell guide instead of the 10dma provided the stock doesnt violate their maximum loss point, which also is different for each investor. But that said, we will sometimes issue sell recommendations on stocks if we see danger ahead.

CRM had a gap up on 8/20/10 and until recently, was showing strong price performance. Today's higher than average down volume is a yellow flag, but not necessarily indication to sell part of all of one's position. One could use violation of the 50dma instead of the 10dma since CRM has violated its 10dma in 7 weeks or less (see FAQ below). One could also take today's action as reason to sell part of their position, then use a violation of the 50dma to sell the balance.



Here's a recent FAQ we posted to the site:

Our book discusses selling strategies in detail. That said, every investor must find their own risk tolerance levels. Some will have shorter hold times (swing traders, intermediate term traders) and others will prefer longer hold times. Some will pyramid just a few positions, so their stops for large positions will be different than, say, someone who holds several or more names. Some will prefer less volatility in their accounts so may wish to hold more names and have tighter stops.

In terms of how we set sell stops with pocket pivots, we use the 10dma and 50dma as our sell guides. That works for our trading personality. If the stock obeys the 10dma for at least 7 weeks, then we use the 10dma to sell the stock if it violates it. A violation occurs when the stock closes below the 10dma, then in subsequent days, trades below the low of that day. If the stock does not obey the 10dma for at least 7 weeks, we switch to using the 50dma as our sell guide to avoid getting whipped out of the position. Of course, if the general market turns sour, we are more than likely to sell the position even if it has not violated either the 10dma or 50dma. Gil is likely to sell his whole position knowing he can buy it back, while I may prefer to sell half, while trading around a core position. Sell stop placement is contextual with the strength or weakness of the general market. Also, if we have a stock that is lagging in a strong uptrending market, we will most likely cut the position in half or sell it entirely to make room for a stock showing greater upside potential.

In terms of how we set sell stops with gap ups which are an extreme form of pocket pivot, we have specific rules we discuss in our book. Generally, after buying the gap up, if the stock trades under the low of the gap up day over subsequent trading days, we will sell at least half the position. We find applying the sell rules we use with pocket pivots can work well with gap ups.

In terms of how we set sell stops with a stock that is breaking out of a base that may or may not coincide with a pocket pivot on that same day, we employ a similar sell rules used to sell pocket pivot stocks, knowing, however, that our loss may be greater because base breakouts are often bought further away from a major moving average such as the 10dma.


This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2024 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.
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