Recently this guy calls into a talk show and asks the analyst "I hold Potash (POT) and I am making money what is your opinion, should I hold or sell?"
The chart pops on the screen and the analyst hums and beats around the bush and finally says " I would sell".
Looking at the chart (Link to globeinvestor.com to view the curve).
Wow. I wish I held this thing.
I wouldn't Have sold there. This is Bull
At that time when the fellow called, POT was trading at $160 and it followed a nice curve inclined 30 deg. It bounced off its 50day moving average (yellow line)and was well above its 200dma (red Line).
At $160 POT faced a lot of resistance and to be fair to the analyst if the traders let go of it POT would have dropped. But hey this is a commodity and it moves on news. As it turned out the competition came in with good numbers and POT broke out. Today it closed almost at $200
Still not knowing all this I would have done one of two things:
1. Bought puts at 160 if it finally let go and tanked below the 50dma I'd then exercise my option and pass my stock to someone else at $160 of course less the premium. If it moved up well, I'll have $40 more per share again less the premium.
2. Or I would have placed a sell on stop order slightly below the 50dma. If it drops to that limit then I am taking out and I keep most of my profit. If it moved up, which it did I keep all my profits
Going forward I would watch POT like a hawk its curve is turning parabolic. Maybe some crazy money is moving in.
Sell on stop orders once triggered they become a market order. With super movers like RIM on the TSX which trades substantially lower volumes than RIMM on the NASDAQ the order could be filled at much lower level than the trigger point. Been there, done that.
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