Ken's Mailbag Q&A 2/11/11

Ken's Mailbag Q&A 2/11/11 - Pyramiding
Kenneth J. Gruneisen - Passed the CAN SLIM® Master's Exam
Kennth Gruneisen founded CANSLIM.net in 1996 and went on to start FactBasedInvesting.com in 2015

Subscriber Questions:

February 9, 2011

Dear Ken,

In yesterdays After Market Update you reviewed the concept of pyramiding into a position. Can you initiate or add to positions based upon intraday prices and elevated volume or should you wait until near the end of the day to see the near final price and volume? Marcus

Ken's Response:

February 10, 2011

Dear Marcus,

Thanks for writing in (about "pyramiding" discussed in the 2/08/11 article in the Featured Stock Update section - read here) with another great question!

I believe the pyramiding approach they teach in the Certification is specifically designed so you might make you first buy (of the recommended 3 partial buy orders for an ordinary "full position") without knowing for sure if volume that day is going to meet the minimum volume threshold for a proper buy signal. If volume is not running at an above average pace and the stock doesn't rise an additional 2-2.5% then you'd probably not enter the second or third buy order(s). Then, if ultimately days go by and the stock falters and fails to convincingly break out, you may end up selling the partial position as it weakens. Always sell if it falls -7%, but of course, you don't have to wait until you're -7% on the partial position to sometimes know that it should just be sold. This approach greatly minimizes the damage if it doesn't rally and you're stopped out, and it allows you to accumulate shares at a lower cost basis that is closer to the stock's pivot point. Best of all it, removes guesswork and lets the market action dictate whether or not you get a full position accumulated or not.

A lot of us, like me usually, wait until near the end of the session to know for sure how solid the volume total is and how the closing price looks like it will be versus its pivot point. Even if that means risking paying a little more, it is often worth paying a little more and having that valuable reassurance that heavy institutional buying demand is present. Pyramiding the buy orders for every full position is recommended, although in years past and before taking the Certification I enjoyed great success just buying the full position all at once and not pyramiding in.

Please let me know if there is any way I can be more helpful to you in your efforts.

Best regards,

Kenneth J. Gruneisen
Founder & Contributing Writer for CANSLIM.net from 1996 through May 11th 2015

About Kenneth J. Gruneisen - Passed the CAN SLIM® Master's Exam :
Kenneth J. Gruneisen started out as a licensed stockbroker in August 1987, a couple of months prior to the historic stock market crash that took the Dow Jones Industrial Average down -22.6% in a single day. He has published daily fact-based fundamental and technical analysis on high-ranked stocks online for two decades. Through FACTBASEDINVESTING.COM, Kenneth provides educational articles, news, market commentary, and other information regarding proven investment systems that work in good times and bad.

Comments contained in the body of this report are technical opinions only and are not necessarily those of Gruneisen Growth Corp. The material herein has been obtained from sources believed to be reliable and accurate, however, its accuracy and completeness cannot be guaranteed. Our firm, employees, and customers may effect transactions, including transactions contrary to any recommendation herein, or have positions in the securities mentioned herein or options with respect thereto. Any recommendation contained in this report may not be suitable for all investors and it is not to be deemed an offer or solicitation on our part with respect to the purchase or sale of any securities.

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