Page 782 - How to Make Money in Stocks Trilogy

Breaking Boards: Successful Trades and Lessons Learned 69

up in price. The heavy buying that causes the gap in price is usually the
result of a strong earnings report or other positive news.) “Buying gap-ups
at that time was scary to me,” says Mike. “Now I love them and often pay
attention to stocks that gap up in price because I know that these stocks
often end up going on to make big gains in the market.”
Mike was able to learn from that mistake and made some nice gains in
another IPO, Michael Kors. “Having subsequently learned how to buy an
IPO base correctly from my Google experience,” he says, “I didn’t falter
when it came to the Michael Kors IPO. I bought the stock on January 17,
2012, at $27.11. I had done my homework before the stock made its move
and was waiting. Michael Kors was sponsored by three quality underwriters
and had triple digit earnings and sales growth. The company’s products were
popular and widely sold in department stores such as Macy’s. On January
17, Michael Kors had a gap-up, and I bought the stock. I added to my shares
on three different occasions as the stock exhibited strength and moved
higher, finally selling my position as the stock slid below the 10-day line for
the first time in 8 weeks. I have learned that a stock that respects the 10-day
moving average for a long time can be sold when it breaks that line.” Mike
had an overall gain of 74% in Kors.

• KEY POINTS •

• Watch for quality IPOs as they break out of their first base.
• Consider selling if a stock has stayed above the 10-day line
during its run, then falls below it.

If You Have Big Profits from a Bull Market—
Sell if the Market Direction Changes

Anindo Majumdar was a software engineer for Cisco Systems in the mid-
1990s. He said the company used to give employees stock options, so he
became interested in seeing how the stock was performing. This was his first
introduction to the stock market, and he viewed it as an exciting way to
make some extra money.
Every 6 months or so, Cisco would give employees options, and since
tech stocks were booming at the time, Anindo says it was pretty exciting to
watch Cisco rocket higher.