Detail of a Stock Sale

People always want help with knowing when and how to sell a stock. This morning I got stopped out (sort of) of a consumer stock that I bought last fall.

The name of the stock does not matter, I will generically refer to it Acme Brands. I bought Acme last fall for what turned out to be 2/3rds of the accounts I manage, I should have bought it for everyone. I expected Acme to be a slow and steady grower perhaps capturing slightly better returns than the consumer sector.

The stock turned into a monster home run, for such a short time period. I have had a stop order in since May or June and I think I raised the stop order four times since that first one. Today the company gave bad guidance for the next couple of quarters. My stop order was about 8% below last night's close. This morning during the first 20 minutes or so of trading the stock got with in $0.40 of my stop order and started to go back up. I decided to change my stop order to a market order and sold it about $1.20 above the stop price. As I write this now, the stock is about $0.50 higher than where I sold it.

Was this a good idea? I don't really know. What I do know is I was hoping to get 15%-20% out of the name in a year and I got about 60% in nine months. The stock has a tendency to gap up or down several points when there is news. If the next big news story turns out to be bad the stock could easily open a buck or two below what had been my stop price.

I would say the tactic used here was a combination of objective trading strategy and gut feeling. The stop order part of the story is disciplined strategy and tweaking it a little to sell the stock was my gut. Discipline and gut feeling are two tools that any investor can employ, why not use both?