Nothing is worse than stopping out of a position – and then watching it rally higher.
All investors face this problem from time to time.
Hoping to minimize this outcome, investors will dedicate time, effort, and even money to software and publications...
But as we've said before, there is no way to precisely predict the upward or downward moves that a stock will make.
We use stop losses to address this issue at Chaikin Analytics.
We set a stop loss every time we recommend a stock to our readers. If it closes below that price, we sell the stock.
No matter what.
Of course, it hurts if that position then rallies to a new high... But a stop loss could save you from the pains that come with riding a stock down to zero.
Investors don't have a crystal ball. But it's critical that we have a clear exit point for every investment decision that we make.
This is harder to do when the market feels chaotic...
Our founder, Marc Chaikin, warned of this "new normal" yesterday.
Recent volatility often sends stocks "careening in any direction." As an example, Marc noted that large-cap stocks like Micron Technology (MU) spiked upwards in recent months...
In the past month alone, the stock is up an incredible 54%.
That's remarkable. But it's also often unsustainable. As longtime readers know, quick surges in the stock market often lead to falls that are just as fast.
But this is only part of the story...
Stop Losses Are a Critical but Imperfect Tool
Taking another look at Micron's gains this year, we see that the stock sits 184% higher than it did on January 2.
If you had bought shares of MU at the end of 2025, you would be sitting on more than a double right now. But what if you didn't own Micron's stock in March?
At that point, the stock had gained 46% since the start of the year. And despite the new conflict in Iran, it kept going higher. The Power Gauge gave Micron a "Very Bullish" rating then as well. Altogether, it seemed like a surefire way to quickly grow your wealth...
So, you decide to invest in Micron on March 18. You realize the company plans to report its second-quarter results that evening. And you don't want to miss out if the stock jumps higher after.
You quickly buy 10 shares of the stock at around $461.73 per share.
But as a seasoned investor, you set a stop loss. You decide a 30% fixed stop loss works and promise to stick to it – no matter what.
As expected, Micron reported excellent second-quarter earnings and incredible year-over-year revenue growth.
Despite this, Micron's stock falls next to the broad market. Eventually, Micron closes on March 30 at $321.80 per share...
That 30% drop triggers your stop loss. You sell those shares and take a nearly $1,400 loss. It stings, but you're glad you stuck to your exit strategy...
That is, until Micron starts tearing higher. On May 13, the stock set a new all-time high when it closed at $803.63 per share.
If you had set a wider stop loss, you would be sitting on a 74% profit in less than two months.
Somehow, that stings even more than the initial $1,400 loss...
But you recognize the market's heightened uncertainty and volatility around that time. There was no way to know that Micron shares would resume their growth.
Fortunately, there's a strategy that addresses this problem...
This Strategy Offers Defined Downside – and Big Potential Gains
Just yesterday, Marc shared an interesting message with his PowerFeed readers.
You may remember that he claimed the markets don't need to go up for investors to make money...
All the markets need to do is move.
In fact, Marc has teamed up with another experienced investor to show his readers exactly how to profit from these moves.
His name is Jonathan Rose, and his strategy locks in huge profits regardless of which way the market heads...
And it only gets better.
Every one of Jonathan's investments comes with a precise downside...
Put simply, you know exactly what you stand to lose with every single investment.
That said, those losses are tiny next to the potential upside. Jonathan's strategy boasts an average 95% gain across all of his positions.
Folks, that includes wins and losses.
You can learn about this powerful strategy this Thursday, May 28, at 8 p.m. Eastern time.
This event is free to attend – but you do need to sign up in advance. To do so, just click this link right here.
I strongly encourage everyone to attend. I know I will be!
Good investing,
Vic Lederman
