United Technologies (UTX) was the most recommended stock in 2012 and the percentage change chart shows that it had a wild ride. (UTX) closed 2011 at $73.09 and gapped higher at the start of 2012 as it opened at $74.91. Just three days later, (UTX) traded to a low of $73.62 for two consecutive days. This was below the 20-day EMA at $74.19, which could have been a reasonable buy level
A stop would need to be placed under the November 25 low of $70.41 (line b) at around $69.88. This would have been a risk of 5.8% ($74.19 - $69.88/$74.19). The weekly chart (right side) shows that the 20-week EMA at $75.76 was slightly violated in late January, which could have been another entry point. This would have allowed one to use a tighter stop under the December low of $71.60.
One should never make an investment without knowing how much you are risking and where you will get out if you are wrong. The top ten lists do not include stops, and in 2013, be sure you place a stop order in the market at the same time you enter a buy order. Never move it lower and don’t make the mistake of not having a stop.
The % change chart shows that by March 15, (UTX) was up over 17% for the year but as the candle chart on the right shows, (UTX) reversed the following week and closed below the prior six week lows. Three weeks later (line 2), it violated the support at $80.98, line c, and began a nine-week slide. (UTX) eventually dropped below the year’s opening price as it hit a low of $70.71.
The support on the % change chart, line a, was broken a week earlier (line 1) as the gain for the year fell below 9%. Over the years, I have known quite a few traders and several with quite deep pockets, but very few would ride a 17% gain to a loss, By early June 2012, (UTX) was down 5% for the year.
At the start of August, (UTX) was back into positive territory once more, peaking with the market on September 14 as it was back to a 10% gain for the year. By the middle of November, it was flat for the year. It did manage to reward those who stuck with the position all year with a gain of 8%, or including dividends, just over 10%. This was still less than the performance of the Spyder Trust (SPY).
For (UTX), you had good technical reasons to close out your long positions in April as the stop should have been raised to under the March low of $81.71. This would have protected a 10% profit since it had dropped 7% in just a few weeks
In 2013, you should protect your profits when you have them by adjusting your stop when a market moves in your favor. Never ride a good 8-10% profit into a loss. I also favor scaling out of long positions if my first upside target is reached.
In those lists I have examined I have found very few analysts who follow up on their recommendations more than a few times during the year, and as I mentioned before, they do not use stops.
These lists can often be used as an excuse by investors or traders to not do their own research as some just blindly follow the advice. Make no mistake, profitable investing or trading does take work and one of my goals has always been to educate, not just give recommendations.
Therefore, if you are following their fundamental advice, you need to do the necessary research to assess whether their fundamental argument makes sense or not. Compare to the conclusions of other analysts and also look back at how accurate their fundamental analysis has worked in the past.
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