Examine Rochester Medical

Stock of the Day – Update
Rochester Medical (ROCM)

Monday’s Closing Price: ROCM – $16.44

Sector: Health Care
Industry: Health Care Supplies
52-week Price: $6.85 – $29.76

Well, ROCM is now up almost 20% from its low last week and I don’t own shares!

Why? I had to sell based on my setup. See the trade setups below which turned out to be WRONG. I COMPLETELY understand why they were wrong and it was staring me in the face the entire time; after Dankkir noted the un-filled gap on the charts that I essentially ignored. Well, if we waited more patiently and placed the position when the gap filled, we would still be holding into today’s action with an approximate gain of 16% and earnings due to be released after the market close. I can’t tell you if I would have held through earnings today.

I made a mistake, closed my loss and went back and studied what I did wrong. Therefore, I will be prepared to look for these things in the next opportunity. I placed my first trade over 10 years ago but I still make small careless mistakes but the most important thing was that I didn’t allow it to hurt me! I followed my rules!

073107_rocm_wkly.png

This should have been the ideal trade setup:
Ideal Trade Set-up:
Ideal Entry: $14.14 (area where gap was closed)
Risk is set at 1.0% maximum of total portfolio or $1,000 of $100k
Stop Loss is 8% or $13.01 (below the gap area)
Number of Shares: 884
Position Size is $12,500
Risk is $1.13
Target is $21
Risk-to-Reward is 6-to-1

Potential Trade Set-up #1 – WRONG!:
Ideal Entry: $15 (currently $15.14)
Risk is set at 1.0% maximum of total portfolio or $1,000 of $100k
Stop Loss is 5% or $14.25
Number of Shares: 1,333
Position Size is $20,000
Risk is $0.75
Target is $21
Risk-to-Reward is 8-to-1

Potential Trade Set-up #2 WRONG!:
Ideal Entry: NOW (currently $14.75)
Risk is set at 1.0% maximum of total portfolio or $1,000 of $100k
Stop Loss is 5% or $14.01
Number of Shares: 1,356
Position Size is $20,000
Risk is $0.74
Target is $21
Risk-to-Reward is 8-to-1

*This trade setup could have worked with a 10% stop loss.*

Comments

  1. Comprinhas says

    Nice work Piranha!

    Greatings from portugal

    Comprinhas

  2. Yea, i got stopped out of this one too. Can’t win them all!

  3. Gaius Marius says

    Chris,

    You continue to do a great job, and I appreciate
    it when a trader cites his mistakes and shares them
    with others. This is the true meaning of teaching.
    I got into ROCM at 15.00 and 14.00, thought I was
    going to the poor house and finally chickened out
    at 15.41. I had traded this stock in the low 20’s
    earlier this year. Your article on ROCM got me back
    into it. Sorry you stopped out, but that shows
    discipline. I just got lucky, since I averaged down (a stupid habit I must overcome). Keep
    it going, you are one of the best financial blogs
    in the sphere.

    Gaius

  4. oh well win some, lose some but looks like its heading back to below moving avgs after their earnings so could be right back to where you sold it…i guess lack of accumulation in the chart after the major selloff in May shows that market knew better and that earnings were going to be less than stellar, besides tough for a chart to repair that big of a selloff (overhead resistance from trapped longs from the last runup was too recent for me to buy this chart), needed to build right side of chart first……

  5. I also got stopped out…. I agree with Gaius Marius: “I appreciate it when a trader cites his mistakes and shares them with others. This is the true meaning of teaching”

    thanks and keep teaching

  6. ROCM 14.48

  7. Hey Chris, I wanted to give you an update on this position you mentioned sometime ago which you may have forgotten, but I hope you did not.

    I originally got a position on this stock on July 10 at $15.10 based on your original analysis and my own research. I realize after you further analyzed it that the entry was incorrect but the cash left on the table was a forgone conclusion so I remained in the position.

    Since then, the most the stock dropped was 12% which should have kicked me out. Although, I decided to stay in due to the lack of volume on the decrease in price.

    I can say that you have another winner on your hands. In the last two days, the stock has risen 15% on heavy buying (a great sign as you know). I see your initial targets as easily reachable and maybe some more.

    Let me know what your re-evaluation of this stock is if you choose to do one.

    Thanks again for your thorough research and the valuable info you provide. Keep up the great work!

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