247Bull Trading Portfolio: Tight stops trigger profit taking as market pulls back

Our recent decision to tighten the stop losses on our two remaining trades led to automatic profit taking last week as US equity markets ended lower. This article provides an update on the recent trades within the 247Bull Trading Portfolio.

Portfolio strategy

The 247Bull Trading Portfolio employs a trend following strategy which seeks to take advantage of companies and markets that have established powerful trends.

Active trades

None at present

Trades closed recently

Kimberly-Clark (KMB): On 22 January 247Bull went long Kimberly-Clark (KMB) at $87.25 as it broke above $87.00, a level which had acted at overhead resistance since August 2012. Immediately following its breakout the stock pulled back, however it did not reach our stop loss and subsequently formed a nice uptrend (green lines).

We were stopped out of KMB on 12 March at $93.70 when the price hit our automatic stop loss. The trade did however produce a profit of 7.4%

A 1 year daily chart of Kimberly-Clark Corporation (NYSE:KMB) (Click on the chart for a larger version)

A 1 year daily chart of Kimberly-Clark Corporation (NYSE:KMB) (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

HCP, Inc. (HCP): On 25 January 247Bull went long HCP at $46.94 after it breached previous overhead resistance. Following its breakout HCP experienced a period of congestion, however it overcame this and established a strong uptrend.

We were stopped out of our HCP trade on 15 March when the price hit our automatic stop loss at $48.50. The trade produced a profit of 3.3%.

A 1 year daily chart of HCP, Inc. (NYSE:HCP) (Click on the chart for a larger version)

A 1 year daily chart of HCP, Inc. (NYSE:HCP) (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

Future trades

We remain on the lookout for future trading opportunities.

Final thoughts

An important aspect of trend following is knowing when to take losses. Renowned trend following trader Jerry Parker talks about the need to take an “optimal” loss. “You don’t want to take one that’s too large, and you don’t won’t to have your stops so close that you get bounced out.”

Parker says, “We win when we take small losses and let our profits run, so the key is not to be desiring to take lots of small losses.” He goes on to talk about the pragmatic attitude that successful trend following trader needs to have.

“Hang on to the trade, don’t get too excited. If you’re not making very much money, that’s fine. If you’ve got a little loss, that’s fine. If you make a decent profit and it turns into a loss, that’s fine. Just hold on to it, and then really get aggressive when you’ve been rewarded by a big huge profit.” 

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