Page 405 - THE MARKET WHISPERER

THE MARKET WHISPERER 40 1

As noted, you must take a partial at the first pullback beyond your first
target. How will you know this is the correct partial point? At first you
won’t know: that comes with the “art of trading” as you gain experience
and insight. Generally, I would say that a partial for a share priced between
$20 to $60 should be between 20 to 40 cents from the breakout price. The
problem with a generalization of this kind is that sometimes the price will
break out without looking back for up to one dollar from the breakout
point, so that realizing 20 cents is far less than the potential profit. To
identify the correct partial point, you need to “feel” the stock, understand
it and have tens if not hundreds of attempts at figuring that point until you
come to understand naturally where to take the partial piece. Sometimes,
the difference between the successful and the unsuccessful trader shows
precisely at the first partial. New traders, unlike the experienced hands,
exit too quickly from a stock running up and too slowly from a failing stock.

• Rule 2: Buy More
Has the price broken out, have you realized your initial profit, and is the

stock proving to be strong? Buy more! Always give preference to a stock
with which you have already booked gains over another that is about to
break out but with which you have no experience, good or bad. No one can
tell if that new breakout will succeed, and never will, but the one you are
currently trading in has already proved itself. It has broken out, you have
taken a reasonable partial, and now you are ready to join it for round two.

SMART Show faith in a strong stock: wait for the pullback and
MONEY buy more. Buy it even if you do not see a perfect technical
reversal.

How and when should you buy more? Once you have taken the partial
of 3/4 of the quantity you are holding, set a limit order at a lower price
but which is just slightly above the original buy price, and wait for the
pullback. For example: you bought 1000 shares at $29 and took a partial
with 800 shares at $29.25. Set a buy order for 400 more at $29.05, using
the limit order which waits in the BID column and will execute only if the
stock reverses. In many cases, you will find that in a short time, the stock
will execute a retest (described in earlier chapters) close to the initial

breakout point.