Rochester Medical (ROCM) is a highly profitable maker of catheters and incontinence products (hey, it's a business!). It has enjoyed a fantastic run since breaking out of a short 6 week double-bottom base on March 12, 2007. The pivot point (or buy point) was at $17.55 or ten cents above the middle of the "W" formation. Since then the stock rocketed over 69% to $29.76 in about 7-weeks.
Then on April 27th the stock dropped over 25% suffering it's largest one day price drop on very heavy volume. The stock closed at the bottom of the days wide trading range, another negative sign. Investors would have been prudent to sell all or part of their position at this point. The next day the stock rallied to a high of $25.48 but then reversed and closed at the bottom of the range. The solid sell signal came today May 1st when ROCMgapped down and sliced it's 50 day moving average on huge volume. The stock also closed below it at $18.44. If you would have bought this stock at it's proper CAN SLIM "buy point" you would still have a small profit. But if you would have stuck to the sell rules you would have done much better. It pays to have solid, proven rules.
The importance of cutting your losses is very important but it's also very important to never buy stocks that are extended above proper buy points. There are many traders who did not buy properly and were "sucked" into this stock by their lack of patience, lack of knowledge, and perhaps their greed.
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