Watch the trend

Simon Bonouvrie

At Cadence, we have a process of scaling into and out of stock positions. When a price trend in a stock turns and moves materially off a previous high we will start selling the position. This process of scaling out of the position continues as the stock trends lower. We also institute a hard stop discipline when the stock falls a material amount from our average cost price. So generally speaking, we sell stock as the price moves lower with a view to possibly exiting the position after a significant price drop. We hold the view that stocks like to trend, therefore, we don’t add to a falling position. If the fundamentals of a stock have not deteriorated, or in fact improved, and the stock price starts to recover after a significant fall then we may look to scale back into a position or initiate a new position. We need to see a technical price chart-bottoming pattern before considering buying the stock. We will only invest once we think the price trend has reversed and is heading back up.


Comments

Please sign in to comment on this wire.