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No. of Recommendations: 8
Okay Anne, let's look at ODP,

http://finance.yahoo.com/q?s=ODP&d=c&k=c3&a=m26-12-9,r14,v&p=e50&t=6m&l=on&z=m&q=l

First, I should point out that if I were following ODP using my system, the first buy signal came on June 28th at $10.00. I would have been in ODP until Sept 17th, when the markets reopened and ODP dropped to 11.00 (at the open), where I would have been stopped out (a modest 10% gain in 3 1/2 months, but better than a loss). Since the beta is 1.04, I would use a 10% stop loss order. For beta's <1.00 I use 8%, 1.0-1.4 I use 10%, >1.4 I use 12%.

The next true buy signal where ODP met my RSI, volume, and MACD was Nov 20th intraday (likely early in the day) at around $15.75. I would still be in ODP, as there was never a stop loss that has been hit, so my basis would be 15.75. A side note that I don't think I have explained is ---- Any time I have a stock that has risen 10% (remember I have a 15.75 basis), which ODP did when it closed at 17.37, I reset my stop to my purchase price. So right now strictly following my system I would have been in at 15.75 and have a stop loss at 15.75.

However, I am not particularly excited by the behavior of ODP. It has had two cahnces to show it's upside potential, and on neither occasion has it rocketed higher. What I really like to see is a stock that rockets higher within 2-3 weeks of my purchase. The dissappointing aspect of ODP has been the lack of any real big volume days other than 12/05.

Because there is only a limited amount of capital to invest, quite frankly I would be looking for better opportunities, and I would likely close my position in ODP. This is one of the few areas where I don't have hard and fast rules, but I use my gut feel. In essence, if I have been in a stock twice in six months, and on both occasions it has increased modestly, but shows no signs of taking off for a 30-40% gain or better, I would have to consider closing the position. The primary reason is that I would always see other opportunities that look to have better returns.

But you are correct that had you recently started following ODP, 12/5 was a true breakout day (say a purchase at 17.37 and a 10% stop loss).

Just from experience and looking at the charts, I have a gut feel that ODP will hit the stop loss before it goes up to 19.98, but you just never know.

Once again, one of the keys to my system is to buy when the 4 signs all line up on the same day. Granted, you are correct that on 12/5 that did happen, and now it is lower, so one would think it should be a better entry point. But that is simply not the way it works (because since then the volume hasn't been what we would like, and the RSI is falling fairly sharply), so now is not a good entry point. Of course, you could buy it if you wish, but always set the appropriate stop loss order so you won't get hurt. I hope that explains it.

Also, this is a system that I have developed using my own trial and error. There are numerous things that could be changed to customize any TA system to your own style. The keys to success are
1) Diversification 2) Money Management (Strict Stop Loss Rules) 3) A set of buy and sell rules that you follow regardless 4) Developing a method to screen stocks to place on your watch list 5) Self Control and Self Discipline to follow your preset rules 6) A system of evaluation and feedback on each purchase and each subsequent sale that allows you to objectively evaluate and modify your system as appropriate.

NukeJohn
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