Trade Review:(LFT)

Looking at the chart of (LFT) today I can't find any reason why I shouldn't have bought it when I did. The stock found support at the 50 dma on 4/28 and bounced off of it immediately, closing at the upper end of the day's trading range on above average volume - pretty bullish behavior. The time leading up to the pullback showed (LFT) as a true leader under heavy accumulation. The relative strength line was leading. This was it's first pullback to the 50 dma which gave it good odds of succeeding, nonetheless the breakout failed.

Unless, of course, one bought the stock right at the 50 day line.

This is why I continue to examine this as a new strategy. LFT could've been purchased on 4/28 as low as $20.30 - the buy point above the prior high was around $26 - the stock had already advanced 30% before I purchased it! It went on to $28.74 before heading right back to the 50 dma and stopping me out for a loss.

The more I look at leading stocks the more it seems that I could do better trading the moving averages at the line rather than at the new high. Some stocks will certainly fail to hold and stop out, but the others should be good for a 30 to 40% gain rather than the standard 20%. In general 50 day bounces seem to be good for around 10% above the prior high before they run into trouble.

So to summarize this purchase I like the stock pick but think that I can improve my timing. I think I can trade more aggressively around the moving averages and get better results, though there will be a learning curve involved.

A reader made an interesting comment in my last post so I'd like to clarify - I don't intend to stop buying first and second stage breakouts of good stocks. I'm only looking to adjust the method I use to buy on the moving average support purchases.