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A few moments ago I sold all of my shares of ResMed (RMD), which amounted to 150 shares, at $38.46. These shares were purchased 2/4/05 at a cost basis of $29.87 giving me a long-term gain of $8.59 or 28.8% on these shares.
This sale brings me down to my 'minimum' portfolio size of 5 positions. I have set my maximum at 20 positions and my minimum at 5. What this means is that with this sale, as before, since it is on 'bad news', which means selling on a defensive basis as part of a decline, I shall be 'sitting on my hands' with the proceeds. That is, I shall not be replacing this position.
However, since I am now at 5 positions, if any of these are sold on 'bad news' I shall be looking for new stocks to replace them. I hope you follow this 'strategy'.
I would also like to explain the why of my sale.
Basically after my initial purchase of ResMed (RMD), I had two partial sales at appreciation targets--at 30% and 60% appreciation levels. My approach to stocks requires me to sell stocks if they decline to certain levels. After an initial purchase, I sell a stock if it declines to an (8)% loss. After a single sale at my first appreciation target (30%), I sell if a stock declines--slips back--to 'break-even'. With additional sales, my sell-point is increased to 50% of the highest appreciation sale. With ResMed having been sold partially at a 60% appreciation level, this means that when the stock dropped to under a 30% appreciation level I was given the 'signal' to sell the stock.
Actually, the stock was 'flirting' with a sale yesterday as it bounced at that 30% appreciation level under and over. I hoped it wouldn't break through but with today's market weakness, ResMed dipped and I sold shares.
RESMED (RMD) IS RATED A HOLD
If we look at the ResMed "point & figure" chart from StockCharts.com, we can see the technical weakness with the stock, after peaking at $56 in February, 2007, has struggled to move higher, failing to make a new high in December, 2007, when it reached $54, and then breaking through support currently.
This isn't about 'liking' a stock. I like ResMed a lot. But my trading system required me to part company with the shares. Successful trading is about some sort of discipline and I try hard to depend on my own trading rules to succeed. I hope that I shall be a shareholder in this stock in the future, but for now.....
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Yours in investing,