- James F. Taulman - www.JamesTaulman.com
Q: I bought MFE after seeing it as a set up in your Sunday Set Up Report (learn more here) I'm thinking of selling it as I have noticed that there is a decrease in fund ownership from the March 09 number of 363 to the June 09 number 360. What are your thoughts on this?
A: Good to hear from you. I hope all is well.
I don't think that should be a reason to consider selling at this point though it could be at least noted to see if a trend does develop.
I would think that once you own a stock your biggest reason for either holding or selling should mostly be based on the price/volume action. As a matter of fact, price/volume action supersedes everything else and MFE is holding up quite well since it triggered our buy signal on 6/29. The stock is at new all-time highs and there was the recent solid break out to those new all-time highs on 6/29 that occurred on almost 3 times normal volume. Also there has been support recently found at the 50 DMA on 6/23 and 7/10. An area where mutual fund managers usually step in and add to as existing position. These are signs that institutions are still accumulating shares.
Since the breakout volume has been about average with and in a tight trading range. As you know virtually everyone that owns the stock is sitting with a profit and there is no overhead supply in the way of it making possible further gains. The company remains a leader in a leading group with continued high rankings.
FIG 1 - Chart below shows nice breakout, support found at 50 DMA (red line) and recent quiet trading even as the price is at new highs. Not many willing sellers.
FIG - 2 Weekly chart below shows a nice longer term base without much extension.
I applaud your manner in which you seem like you will sell a stock that is not performing well and I am sure that you follow the rules of never letting a big loss develop, yet in this new market somewhat ideal selections such as MFE have been more hard to come by. If you are in such a fundamentally sound stock that meets the winning characteristics and you bought right, I would strongly consider letting it run if it will until it technically breaks down or something fundamental changes with the company.
The main thing I am concerned about is that MFE is set to announce earnings on July 30th and as you know, holding a stock through earnings is tough. I will have more updates on MFE in my Sunday Set UP Report (learn more here).
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