A Reader Writes "I noticed that BOOM had dropped well below your purchase price...."
Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisors prior to making any investment decisions based on information on this website.

Checking my mail/comments this morning, I saw that I had an interesting comment from Steve who had some concerns about my trading discipline. Before I answer his specific question, I would certainly like to point out that I endeavor to maintain as transparent a trading policy as possible. When I buy a stock, I post the purchase, and when I sell a stock I do the same. That being said, I do this manually, so it is always possible that I make a mistake with about 20 investments that I am following.

Steve writes:

Hi Bob,

I noticed that BOOM had dropped well below your purchase price a few days ago for a good portion of the day. Since you had already sold some shares at a profit, did you sell all of your remaining shares when it dropped below your purchase price? If not, why was this stock the exception to your rule?

Thanks,
Steve

Let me review my trading activity and my strategy in general on this stock and my other investments.

I am glad that you are keeping a close track on my trades and my blog and I am glad you took the time to write!

Currently I own 200 shares of Dynamic Materials Corp. (BOOM). These shares were acquired 12/05/05 at a cost basis per share (including commissions) of $28.32. I sold 40 shares of my original 240 share purchas (1/6th of my position) on 1/27/06 with proceeds of $1,489.00, giving me a price/share sale price of $37.23, or a gain of $8.91 or 31.4%. According to my avowed strategy :), I should be selling my remaining shares if they hit my cost or if they get down to $28.32 after a single purchase. Currently BOOM is trading at $29.78, so it is above my purchase price, but let's take a look at a chart for the past three months and see if the stock did dip below that $28.32 level. Here is a chart from CNNMoney.com:

Clearly, BOOM did drop down under that $28.32 level. So you are correct. If I had a programmed sale in my portfolio the stock would be gone! So I stand corrected and you have made an excellent observation. I didn't make any exceptions to my trading rules, I just missed the price drop as I went about my business that day!

Meanwhile, BOOM is once again above my cost, so I shall not be entering a sale but if it dips back down to the $28.32 level, the stock, as long as I am paying attention :), will be gone!

Thanks so much for commenting and catching my trading error. Thus far, that sale would not have added any gains or protected me from any additional losses.

Bob