Catching falling knives and other painful lessons

This last couple of weeks taught me a couple of lessons that left a scars to remember – though small.  Three retail stocks that i have watched and wanted to purchase, IF the prices dropped considerably to my targets.  TJX, DSW  and TSCO.

My initial target for TJX was $72.50 (it is currently $75.53 and my cost basis is $75.33), but i relaxed my target within 5% as i worried that the stock would not fall to my target.  However, it did fall to just below $74.  Key learning to watch the knife fall and hit ground before picking it up.  My position is 5% within my target, but i could have had a better entry point.  Position created in 2 purchases, and a third purchase is possible but ONLY at the target.

For TSCO, the target initially was $63, and the current price is $54.88 and my cost basis is $57, much below current price.  TSCO was bouncing in large percentages during the time period, and my position covered 3 purchases.  Again, the knife did not hit the ground, but hit my target price … after 30 day wash rule expiration, i may sell the most expensive position for loss and reposition.  Same lesson as TJX to wait for the knife in ground.

DSW was purchased in two different accounts (one much longer term that will be ignored here).  DSW dropped like a rock on a host of potential rationalizations, but i purchased a block at $16.20 thinking i would ride a bounce.  It bounced to $16.40 immediately and i put in a stop at $16.10 thinking that the bounce would continue up.  It sank again and my stop was executed.  It did not go too much below $16.05 and now it is at $16.73.  The value and yield is interesting and below $16.50 i will pick it up after 30 day wash rule.  Lesson learned … stop loss orders are a bane, but would i go without them for dead cat bounces?   … probably not.

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