This is a segment of a column that was originally published on
on April 27 at 11 a.m. EDT. It's being republished as a bonus for
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Brush Engineered Material
took a nasty fall yesterday after disappointing earnings.
But notice how the decline just tagged the 50-day moving average before buyers swooped in to take everything that was for sale.
If you're long BW, I'd suggest using the 50-day moving average as your reference point for a protective stop.
If the stock falls below yesterday's low, you'll know that the stock you just bought was a falling knife. Just remove it from your hand, put a bandage on the wound and move on.
But if support holds up, you've got a good shot at making money on this fire sale.
(Please see chart below.)
At the time of publication, Fitzpatrick had no positions in the stocks mentioned, though positions may change at any time.
Dan Fitzpatrick is the publisher of
, an advisory newsletter and educational forum dedicated to teaching effective risk management and trading methodologies to aspiring traders and investors. He is a former hedge fund manager and a member of the Market Technicians Association, and he now trades from his home in San Diego, Calif. While Fitzpatrick holds various securities licenses, he does not give recommendations to buy or sell stocks. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. He appreciates your feedback;
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