Pfizer and Bullish Sentiment

On September 17th, this site recommended buying Pfizer (PFE), the opening price on September 18th was used as the entry point.  Subsequently half of the position was sold at the stop loss point of 35.40.  Traders are currently holding half of the original position.

When is the best time to add on  to a trading position?  Many traders believe in adding on – if long at a lower price or higher price if shorting.  While this lowers your average entry position – higher if shorting, it could lead to significantly larger trading losses if price continues to move adverse to the position.

A safer add on point is after price has moved in your favored direction and to reduce the size of the add on positions.  For example, you buy 100 shares of “XYZ” stock at 55 then add on 50 shares if “XYZ” reaches 60.  This procedure could be continued if prices kept climbing.  You could add another 25 share if “XYZ” hits 65.

With this method your trading capital is increasing, and you can raise – if long, the stop loss points.  For example, if the stop loss points for an entry of “XYZ” at 55 were at 50 and 52 when  ‘XYZ reached 60, the stops loss points could be raised to 55 and 57.   

The daily PFE chart courtesy of Trading View illustrates the add on point at 39.46, this is .01 above the most recent high.

 Since traders are now only holding half of the original position, the add on should be smaller than the current position.  For example, original PFE purchase of 100 shares, stopping out  half  the position leaves 50 shares.  Add on 25 shares at 39.46.  

Market Sentiment

The following chart from Hulbert Ratings illustrates the sentiment of short- term stock market timers.

It shows that after only about a 9% decline in the Dow Jones Industrial Average (DJIA), sentiment has already reached the excessive bearish zone.  This implies a significant bottom could be in place or could be very soon.  The bearish season for US stocks usually lasts until mid – October.  Seasonal patterns are not always precise. 

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

3 thoughts on “Pfizer and Bullish Sentiment

  1. The trading advise given here of averaging up’ in a reduced stop loss size trade
    by buying when a security exceeds a bullish resistance price target is very sound advise.

    It may seem like an easy thing to do
    ,but I suggest that many traders would take the exact opposite tact
    and want to”double down” on a losing trade,
    by dollar cost averaging down to bring their cost per share down.

    However, this then leaves the trader open to a new potentially substantial undetermined additional loss, of unknown proportions.if the security continues down,

    Cutting your loss by 50 %, on the initial trade recommendation as suggested in this article, if the trade goes against you eliminates the possibility of catastrophic loss later, if you’re proven to be wrong in your initial market opinion.

    Like

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