Case Study 2 - An on going medium term holding in VOD

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This case study just shows a small time period within the medium term holding of Vodafone.

The choice of stop loss for Vodafone was made based on the previous rise from Nov 97 to Sep 98. As the graph on the left (from Sharescope) shows a stop loss set at 8% (the red line) would have just kept me in throughout that rise.

On the 4/1 a very rapid rise began (see graph on right from StockHistory), this was uncharacteristic for VOD and I expected the sharp fall that followed. This gave two choices either continue holding for the medium term or sell when it starts to fall and buy back when it begins rising again. With the trading costs and the spread it would require a fall of around 10% to make the latter course of action profitable, and not expecting quite such a large fall I choose to hold. In the event it can be seen that the fall was a touch over 8%, triggering the stop loss. Under the circumstances I choose to reset the stop loss at this point as it was now more or less back on the original trend. Note I do not normally reset a stop loss like this, and only did on this occasion as the fall was an inevitable result of profit taking after the unusual rise. On the 12/1 I again reset the stop loss, this time because it had only risen because of one of the annoying but quite common wild swings that occur on SETS stocks bid and offer prices pre-market open. The swing is not visible on this graph because it has been set to filter the spikes out of the bid price.