Fsys – I hardly knew ye

So I’m out of FSYS as of noon today.  I really didn’t want to get out.  This stop loss stuff really pains me.  I guess it is so final, it means that I have no chance of making money on the investment.  Anyway things I learned from this one:

-NEVER buy a stock on a big up day.  Always wait until the next day to either confirm the trend or buy at a slightly lower price (in another upward trend)

-Good stop prices are fairly easy to see on a chart, continue to stick with them. I learned with FSYS that my stop was correct…once the stock broke through my stop price, it continued down another 55 cents or 2%.  Ok now it is down another $1 or 4%. Ouch. (since writing this the stock is now down $1.30 from my stop price…since writing that it is now down $1.70 from my stop price)

-A better stop price would be slightly above the visible, obvious stop because it seems lots of others have stops at the obvious price, and when it is hit the stock goes into a free fall.

-I’m not sure buying stocks breaking out to all time highs is what I’m looking for.  Unless the stock is still “fairly valued” they usually don’t show up on my radar screen until their run is over.  Also all of the people who come into these type of stocks when I do are very weak buyers who run for the exits at any sign of weakeness.  This means that the stock can fall very far, very quickly.  I need a newer approach.

-only nibble buys until another break out.  This is a really hard one for me.  I am afraid to buy higher because of greed.  The truth is this will lower my losses and boost my gains by only exposing the most money to strong stocks, and minimizing cash exposure to delicate stocks (a la FSYS).  For example if I plan on investing $15,000 into a stock only $5k should be exposed until a trend is confirmed.

How can I find a fsys before it breaks out?  I realize that is the holy grail of investing but I feel like there has to be an approach that works.  There are so many uknowns here and so many stocks to choose from that it seems like it would be also impossible to find FSYS in some sort of screen in March.  Some things to explore:

-price…I wonder if a lower price ($10-$20) means that a 4x run is more likely than a 4x run for a stock at $50-$100.  Part of the reason for this is that you need both institutional investors to buy and build support (they could care less about price…they only care about company value), but individual investors may drive the run up (they do care about price, even if they are “sophisticated”).  Perhaps I’ll look just a stocks with a price of $10-$20.

-moving average…I know it is not the only answer but I can see that all of these stocks were great buys after they broke their 200 day moving average. So that is something I will screen for as well.

-bear market…We are in a bad market.  Therefore there are fewer and fewer stocks that are anywhere near all time highs.  Also there are more and more beat up stocks, which could present great opportunities to ride the markets return.

ok to end this post FSYS is now down over $3 from my stop price.  I guess stops are a very good thing.