Buy The “Breakout”?

On Friday we purchased shares of Ctrip.com (CTRP) at a price of 4753 (point A) as the stock broke past a short term level of resistance above the rising 5 DMA. We took partial profits as the stock climbed above 4800. On Tuesday, as the stock broke above the September high of 4943, it was mentioned in the chat room it was “time to think about taking more off on CTRP as the “breakout” buyers chase it to new highs”. Selling some on the new high enabled subscribers to lock in profits of 1.90 on part of their position before the stock plummeted 1.43 over the next several hours.

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Even if you do not participate in chat, it was mentioned in the midday video that swing traders were advised to sell half of their balance above 4900 (which there was opportunity to do so) and to raise the stop on the final 1/3 position to 4830.

There are a large group of “breakout” buyers who have been trained to purchase a stock as it makes a new 52 week high, that is the OLD WAY of making money. Markets evolve and buying a stock based on techniques which worked years ago will yield inferior results. The concepts of asking “where has the stock come from?” before purchasing is unique to Alphatrends and helps us make better buy AND sell decisions.

It is likely that we will revisit this stock again, but only if and when it presents us with another low risk entry based on multiple timeframe analysis.