When you feel like buying…you should be selling. Here’s a look at Tabula Rasa (TRHC) (April 06, 2018)


We are looking at Tabula Rasa HealthCare ( NASDAQ: TRHC ). This is on our Growth Stock list, it has been for a while here. We haven’t made that much money on it, a little bit, but generally speaking, the stock has just been churning around. So I wanted to focus on this stock a bit today to emphasize that this was not the time to buy the stock and I’m we’re talking about today.

Here’s the thing: I don’t own this stock. I had owned it and then somewhere along the line I wound up selling the stock. I try to manage my risk, take my positions and then once I’m out I try not to dwell on any trade; so I can’t even give you the exact description of my trade. But I know that I had been looking for a reason to get back into the stock. I saw the way the stock WAS trading today. Remember, it had almost gone up to 41.00 here.

So there was a time, during the day, where this stock was pretty strong. It was looking pretty good, it had broken out above 40.00 and I was thinking you know what? It was my instinct; I need to be buying this stock. I missed the entry here, but you know what? I think I have got to buy this stock. But I didn’t do that because I start really looking at things, I think if I buy the stock right here, wherever I am going to buy it, if I buy the stock right here then where am I going to place my stop?

Again, I make this determination before I will buy a stock: Where am I going to put my stop, because I want to know exactly how much money I am risking. And so as I started to go through this, it takes about 20 seconds; as I start looking at this I am thinking, wait a minute, I am going to buy it here. Now I am looking at where can I put my stop? Here, no. Okay, well that is about 6 percent and all I would be doing is selling when I actually should be buying. So maybe I need to extend it below here, below this last low. So I will put my stop at 35.36 as you can see here.

That is a 9.5 percent move to the downside before I am going to sell this stock? That’s not bad trading that is stupid trading; so I decided not to buy the stock. I thought you know what? No trade is better than a bad trade. If I missed the move, if this is the last time that this stock is going to be at $40.00 or wherever it was that I decided it was time to buy, I missed my entry but I am going to buy the thing anyway. If that is the last time the stock is going to be below this level, that’s okay, I have got to live with it. Do I think that the stock will ONLY, from this point; do I think it will only fill this box, maybe even go higher? Or, do I think that maybe there is a possibility that given everything that has been going on in the stock here, do I think that maybe there is a possibility that some of this box might be filled? Do I think that this would completely sidestep this box? My answer; no.

The point is, I make a decision that I want to buy the stock; it is a decision/action time frame. I make a decision that I want to buy the stock; I’m going to take action. I look at the chart and say, “You know what? I made the decision; I want to buy the stock. I am just not going do it today.” And so what I am going to do is, I am going to wait until this thing gets back to $37.00 or so. My bet is, in this kind of market, sometime next week or the week after we are getting back to this level; it might even get lower. But as we look at the chart you can see that the best times to buy this uptrending stock have been here, pretty much anytime in here, on the 50-day moving average tag. Here, and then back here. So we don’t just adjust that and say, “Oh okay, well this is the best time to buy the stock.” No, not at all.

I wanted to give a ‘shout out’ to one of our members, I was reading in the forum today, this person says, “Eventually I noticed that when I am thinking of selling I should actually buy. And when I am thinking of buying it is time to sell. I have wasted too much money to learn this.” Okay, first of all, it is not a waste of money if you finally learn that lesson; great. But what I just described to you, in my idea for buying TRHC ( NASDAQ: TRHC ), is just that, I felt like buying. Because for crying out loud it is 36.00, now it is up at 40.00, I missed the 10 percent move. Now I need to get in before I miss a 20 percent move, so I feel like buying.

Meanwhile, all the fine folks who bought back here, there weren’t that many of them, but the ones that bought back here a sitting on a 10 percent profit; they’re looking to sell. And so I would have been taking the other side of a real smart guys trade. I am not going to do that.

So what I am suggesting is you focus on being smart yourself. Be patient. Be prudent. Just because you see a stock that you want to own it is probably not the right time to buy it when you are first seeing it. You want to have a watch list and then at that point you start watching the stocks on your list. You will find one that starts looking good at some point but your timing should not be when you see the shiny object. Your timing should be when the right time to buy the stock is upon you. And again, I will leave you with this, it is probably NOT going to be right when you first see the stock.

Free Chart

Leave a Comment