The price action last over the last three sessions from Salesforce.com (CRM) is a great reminder why losers should be sold immediately and/or stop loss orders should be placed after taking a new position.
Salesforce posted earnings last Thursday and its price action was very unique. The stock gapped early AM and ran very quickly to break key multi-week resistance at $146.60 which I can guarantee subsequently triggered numerous more buy orders for those waiting to “buy on the break”. Unfortunately though, within an hour of the open CRM was selling off hard. The stock finished the day up a measly 4.5 points (3.4%) after being up over 10%.
To further beat the dead horse, the last two sessions have seen institutional investors continue to dump CRM shares and sell the stock hard. It made lower lows today and now is trading down 13.5% from its “breakout” intraday earnings high of $148. Ouch.
Buying into any stock on its breakout day or off a hot earnings upswing is fine. But, failing to sell during the reversal or simply place a stop loss is plain stupid. For those investors still holding CRM shares they now have quite a climb to get back to even alongside the psychological mind games that comes with it.
Never forget to suck up your pride and sell for a loss if you are proven wrong. Don’t be a baby! Even if the trade lasts only several hours, staying disciplined will allow you to lick your wounds and trade another day.