Another tough lesson learned

When buying beaten down sectors, you may want to stay away from stocks that are have been on a rebound and are on the second leg up. Often times these stocks will issue more shares to pay down debt, or if an MLP will cut dividends, possibly more than once, which i learned today with SDLP, i lost over 20% on that one. If you insist on getting in, get in with half a position at least until after the first dividend cut or share sale. Even then, still use caution.

In this case, SDLP flashed me some warning signs. After breaking out of a channel above the 50 and 200 day, SDLP gave pocket pivot type volume on an up day, however the up day had a big wick that pushed closing price below the 10dma. This already had me on edge. The next day was a relatively big down day on 1.5x volume. that briefly dipped below the 20 and closed above. I even made an alarm to check if i wanted to sell it. Of course, closing above the 20 dma, i told myself, i could just sell on a violation on the 20, not expecting catastrophe the next day. Next time this type of evidence and feeling happens, i will reduce by at least half and be safe about it.

I am currently in chesapeake, seadrill, freeport, and southwestern. All of which have now issued a share dilution event in the last few months. I will watch with caution for spikes in down volume and reduce as necessary.


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