Jeff

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Thanks.

Jeff

Before I get to these, please know that there isn’t a hard-and-fast “rule” for picking stops or targets. The Strategy page found over at TheStockBandit.com has some guidelines, but it’s important to remember that every trade is different because each stock has its own “personality” if you will. Some stocks may make a huge run for a week to move 5%, while others can do that in an hour, so for the swing trades you have to consider the stock in question and eyeball the recent history of its price moves when trying to determine how far it might go on the next move. It isn’t an exact science, so there is a lot of art as well. That comes over time from studying, trading, and poring over charts continually.

But I just want to be clear that I don’t have a formula to go by when determining my stops or targets…I base them on some general principles (such as: risk less than you want to make), and I base them on the chart of the stock in question (how has it moved, where is recent support, where is next resistance).

For the Initial Profit Target in DRI, as I explained in the video above, the gap in December began at $35.31 (low of 12/18, the day prior to the gap), and the stock just rallied up to virtually touch that same level at $35.30 on 3/24. Knowing that must be an important level for two moves months apart being related to it, I wanted to book some gains prior to that level being reached again, as I expected some sellers to be lurking there. $34.80 was just the spot I picked, conservatively, because I wanted to take some off on the first jump. Setting a sell order at $35.30 might have gotten me close to a sale, but what if that level wasn’t quite touched again? So that’s why I set my price beneath there.

The final profit target was based on that being the general area that the stock tested from the upside and downside between 12/13 and 12/18, and is just another move of the same magnitude I was looking for in the initial pop, which happened to be $2.

Hope this helps! See you in The Hideout!

Jeff