Let’s get right to it and use a previous breakout as an example.

Salesforce.com, inc. provides enterprise cloud computing solutions, with a focus on customer relationship management to various businesses and industries worldwide.

This selection was first added to my High Ranked Leaders Watch list on 10/9 as its shares were setting up in a base near all time highs and above their 50-day moving average. I always consider that technically ideal as there is virtually no overhead supply in the way of any further possible gains, while in the event of a pullback, there is also sound support just below. Additionally, share price is never too extended, usually being near or within 10% of the stock’s 50 DMA, as the stock looks poised to breakout.

 Most of this I developed while I had served as Editor-in-Chief at an independently licensed website that offered stock reports and services based on the CAN SLIM® investment system.

While a selection is on this particular watch list, I am watching for it to trade above its TRIGGER PRICE. In CRM’s case that was $76.31, which was .10 cents above a significant high in what was the current base. If shares trade above that TRIGGER PRICE, while the day’s volume is at least on pace to make my TRIGGER VOLUME hurdle, which is +50% above the stock’s 50 DAV, then by default that stock is triggering a technical buy signal. Then the stock is considered a BUY up to the MAX BUY PRICE which is always +5% above the TRIGGER PRICE. This always gives me a 5% BUY window.

Charts courtesy of StockCharts.com

Shares of CRM went on to break out a few days later on 10/13 with volume that looked on pace to make the required +50% volume. At 10:52 AM that morning, I issued a BreakOut Alert! via email. This stock was then added to the Sunday Stock Report Portfolio and is now being covered as a holding.

This breakout continued trading generally higher for about the next month until the stock pulled back and successfully tested support of the 50-day moving average just before announcing quarterly earnings results on November 19th.

For current holders of Salesforce.com shares, I would put my 1st SUPPORT at the 50-day moving average, which is currently at $73.82 or -4.8% from here.

Below there, formidable support is offered by the 200-day moving average ($71.97) where the stock has previously been defended in late September. This area of support is -13% below, and we would not want to see this trade or any trade get that ugly.

Always do you best to keep any losses small. Use -8% from your BUY PRICE as a guide, yet I personally would not use a sell stop at -8% unless you feel you have to.

Of course, as with any stock, declines with volume or breaks below upward trend lines are at-the-least warning signs, while breaks of support, especially with volume are clear sell signals.

FORMULAS:

TRIGGER PRICE: BASE HIGH + .10 CENTS

TRIGGER VOLUME: 50 DAV x 1.5

MAX BUY PRICE: TRIGGER PRICE x 1.05

MAX STOP LOSS GUIDE: BUY PRICE x 0.92

All of this I consider pretty straight forward, and how I have been doing it for the past 15 years. Most of this I developed while I had served as Editor-in-Chief at an independently licensed website that offered stock reports and services based on the CAN SLIM® investment system.

There is only one wild card that we have to deal with every three months. That is each company’s quarterly earnings announcement. No matter how good any current holding looks technically or fundamentally, when earnings are released, anything is possible. Earnings announcements are the best way to wreck a great going trade. Before the news, investors need to be prepared for some volatility to say the least. Or in a worse case, some steep losses, such as was with SKX as a recent (10/23) example.

In any case, and especially where you may not have much of a profit cushion (10% +/-) or even have a loss, and the company is reporting on say a Friday before the open, you need to make a decision to “hold” or “fold” by Thursday’s close.