Managing your portfolio with regular updates to stop losses, and identifying opportune points to reinvest

The success of GorillaTrades has been largely due to just a few factors: its easy-to-use GorillaTrades System, the Gorilla's enlightening Evening Email, and its explosive stock picks! However, even with this said, every investor knows that no stock can sustain explosive growth forever. So, how do you determine whether a decrease in a stock's price is merely a temporary pullback (that might actually be an opportunity), or the beginning stages of a severe freefall?

When you develop physical symptoms like a sore throat and a stuffy nose, how do you determine whether it is just the flu, or something much worse? Most people immediately take their temperature since a fever can often be the sign of a more severe illness (most likely an infection or a virus, rather than just a cold). Just as you might use a thermometer to measure your overall health, there is an effective way to determine the health of a stock whose strength appears to be deteriorating (experiencing a pullback).

A stock's volume level during a pullback serves as a primary indicator of the stock's condition. The Light Volume Pullback (LVPB) tool is centered around just this. Most pullbacks that signal the beginning of a serious drop occur on heavy volume. A more normal, orderly pullback (opportune entry / reentry point) typically occurs on lighter-than-normal volume. GorillaTrades' Light Volume Pullback tool scans the strongest stocks in the current GorillaTrades portfolio for such opportunities - good points to add to a current position, or even initiate new entries into trades. After all, the ultimate goal of GorillaTrades is to provide its subscribers with the investment options that have the highest probability of success in any market environment!

The above chart of a GorillaPick experienced a series of clear LVPBs (note that each pullback corresponds with a dip in volume). These pullbacks create the best re-entry points, providing an opportunity to add to, or initiate, a new position in a GorillaPick that had previously shown strong characteristics (by confirming) and a constructive technical pattern.

Stock Market Application

The LVPB section of the Evening Gorilla Email lists the symbol of each current, confirmed GorillaPick that is experiencing a Light Volume Pullback and includes a brief description of each of the possible trade scenarios.

Determining your entry point in a trade is a personal preference. Some subscribers enter at the "Trigger Price" (higher risk, but potentially higher returns), while others enter after the Confirmation Day (lower risk, usually 3-4% lower potential return). The LVPB tool provides points of entry into confirmed GorillaPicks on pullbacks along the way of projected growth.

Furthermore, this feature will help spread subscribers out even more, into the many different trading opportunities presented by the GorillaTrades service. Subscribers will now have a completely diversified (and complete) choice of entry by considering a purchase upon trigger, confirmation, or on a light-volume pullback (LVPB) according to your personal risk parameters and portfolio needs.

The Gorilla specializes in foresight, but studies hindsight, and knows the importance of keeping risk in check. While more stable entry points have resulted from the “Confirmation Day” concept, especially during neutral / choppy market environments there's unfortunately a slight bit of profit sacrificed in waiting for a Confirmation Day. Instead of recklessly entering into a trade after a GorillaPick confirms, the LVPB tool may be used to point out preferred entry points post Confirmation Day. At times (during steep market sell-offs and a very strong portfolio) there will be an abnormally large number of Light-Volume Pullback Buys (LVPBs). At other times (when the overall market becomes overextended), there may be no LVPBs. In conjunction with the other GorillaTrades features, the LVPB tool assists subscribers in making wise investment decisions - the one's with the greatest probability of success.

LVPB's and Dollar Cost Averaging Up

Dollar Cost Averaging Up (DCA Up) is the purchase of shares of the same security at successively higher prices in order to achieve a larger position at an average price that is lower than the current market value. If you initially buy a stock at $10 and reinvest at $15, your Dollar Cost Average is $12.50, "up" from $10. Under the DCA Up strategy, one regularly reinvests in stronger stocks as they climb, as opposed to making the full investment at the initial purchase price.

The Gorilla recommends using the relationship between strength and higher prices to increase the probability of a trade’s success. Since the majority of stocks will generally follow the market's overall trend (3 out of 4), this very simple tool (DCA “Up”) may assist subscribers in reducing trade risk and preserving portfolio capital. The DCA "Up" strategy may require extra time and patience, but the payback is enormous when seeking certainty during NEUTRAL market environments.

The opposite of DCA Up is Dollar Cost Averaging Down, or what the Gorilla calls "throwing good money after bad." This is the strategy of buying a stock after it drops below the purchase price, on the hope that it will rebound. The Gorilla warns that this strategy can be quite dangerous, especially if your stock pulls back on heavier volume (the sign of damaging weakness). Just ask a stockholder of any company that has gone bankrupt! Why risk a bigger loss by adding to a position in a stock that could fall even further? Isn't that similar to trying to catch a falling knife? The DCA Down trading approach encourages buying into weakness and "hoping" for a stock's recovery in uncertain market environments, instead of buying in strength (with DCA Up).

The best scenario in a DCA Up strategy is to time your incremental purchases with slight "dips" or pullbacks, as a stock continues to grow. This, however, is easier said than done... How do you determine whether a pullback is a sign of a severe decline (sell, don't reinvest!) or just a quick pullback on the way to continued growth (great re-entry point)? This is a great use of the Light Volume Pullback (LVPB) tool. The Gorilla always encourages subscribers to be creative in adapting the GorillaTrades system to their unique personal trading style. Click HERE for a graphical depiction of the DCA Up concept.

The Gorilla whole-heartedly believes that it is better to average UP, while a stock is displaying strength. However, there are also opportunities on pullbacks (when they occur on lighter-than-average volume). With the LVPB tool, the Gorilla now identifies these potential opportunities on a daily basis.