Last week I told you about some “bargain buying” going on in the stock I hold which is STO. I mentioned the increasing number of buyers as the price started to recover from the 52 week low. It surged to close nearly 6% on the day of release of quarterly reporting showing good results. I thought that the strong close will eventually give way to some profit taking, so a retracement is possible. The next day, (Friday) there was indeed a softening of the share price which continued today, with US market and Oil providing a negative lead.
So here’s a question … are we again at bargain-buying level? It seemed so while the shares are being sold off as a reaction to the latest market results. There are still a good number of buyers still keen to buy. As of 2pm, there are 253 buyers to 261 sellers, that’s a fairly “even” number and price had been supported by the buyers coming off from it’s lows hit in the morning (10.18). It’s also likely that the price can still drift down.
However, remember I bought more shares. I have to now be mindful of the Stop for this trade as well as the initial reason why I got invested.
Stop levels will help protect your capital, if this is breached you have to take action. So let’s say, you got “technical stops” which is the price level, come hell or high water, you will get out and preserve your equity. On the other hand, there are “discretionary stops” which is based upon market dynamics. So how would I trade this… I had gotten in around 10.263, with a stop set below the obvious Support level (10.04). When STO rose 6% that day I bought in, I was tempted to cash in, however, I do have a short to medium term timeframe for this stock so I figured, I’d let the profits grow even if I have to give back some of the profit in the next few days. So here I have elected to use “discretionary stop” based on what the oil market and wider market is doing, that while it is showing volatility, with US earnings still under way (the reports have been OK, not at all dismal as we expect), and at least the downward slide seemed to be over (for oil) because of the prospects of stimulus from various governments and Iran still in the mix. Thought there is more upside to enjoy.
The good thing though, this dip in STO price had let me profit on the Covered Call I’ve written earlier STOLP8 10.75 Call with August expiry, sold for 45cents, bought back at 19cents for a 2.6R profit.
So here’s “Don’t Stop Me Now” – enjoy!
This is going to be a tad bit revealing info, yes, I am old enough to know this music by Queen ”