Today's Hot Topics   ▲  |  ▼

As the chart indicates, AMGN lost some of its upside momentum as the month progressed and on August 30 (point 6) the stop was raised further to $79.76. AMGN started to look more toppy in early September as after retesting the prior high at $85.27, it corrected back to $80.60.

Click to Enlarge

Several days after the low (September 20) I became much more defensive as the weekly relative performance or RS analysis had formed a negative divergence and the daily OBV was below its WMA (point 7). Therefore I recommended tightening the stop to $81.44 on a move above $82.80 and advised selling the remaining position at $84.33. This would have been filled a couple of days later at point 8.

As the chart shows AMGN eventually had a high of $89.95 but then dropped back to $83.68, which was below the prior swing low of $83.98. If I had stuck with the position and just kept moving the stop there was a good chance that I would have been stopped out at a level below $84.33.

Another healthcare stock that I liked last spring was Pfizer Inc. (PFE). My bullishness on PFE was based on bullish signals from the monthly analysis and because it was yielding close to 4%. On April 2 I recommended going 50% long Pfizer Co. (PFE) at $22.22 and 50% long at $21.64 with a stop at $20.44 (risk of approx. 6.8%).

Click to Enlarge

The stop was under the year’s low from late February at $20.75. On April 14, PFE dropped to a low of $21.77 but then rallied sharply above the prior high so on April 26 (point 3) the stop was raised to $21.28.

On the sharp selloff in early June the April low was violated as PFE eventually had a low of $21.40. Since the weekly OBV had confirmed the previous high and because of the attractive yield I stuck with the position.

When you are buying a stock primarily for its yield I suggest that if it rallies 5% or more above your entry level that you use a stop close to break even. The drop to $21.40 put the position down about 3.6% from my entry level, which was more than I like normally like to give back.

Fortunately PFE surpassed the April high in the middle of July, and on July 19 (point 5) I raised the stop to $21.86. This was just under the mid-June low of $22.05 and the July low of $22.00. Just over a month later I was able to raise the stop to $22.88, which was above the entry level and also below the late July low of $23.07.

PFE had a nice rally in late September and early October as it peaked on October 18 at $26.09. The following day (point 7) the stop was tightened further to $24.54, which was just under the late September low of $24.70. The stop was hit on November 1, point 8.

Though the approximate return on the trade, including dividends was just over 12.4%, I regret not taking partial profits in mid-October when prices were close the weekly starc+ band.

NEXT PAGE: Should Have Used a Tighter Stop