Today's low was 41.69, which probably raised concerns among the viewers here.
Do we prepare to exit? Not unless the close is beneath 41.67. Wait, what?
BVN's ex-dividend date was today. The book value of the stock decreased by exactly $0.33 per share. We must correct for that by adding our dividend amount to the current stock price.
Here is BVN's chart since NOV. Click on the image to enlarge and sharpen.
Add $0.33 cents to the current stock price, or lower all previous stop levels by the same amount, and we adjusted our trade for the ex-dividend gap.
This is often overlooked, but essential to being a successful trader.
Happy trading,
Christopher Diodato
Where did you learn about ex-dividend dates and lowering stop levels based on the ex-dividend gap?
ReplyDeleteTechnical Analysis of Stock Trends by Edwards & Magee 1948
ReplyDelete". . . Whenever a stock goes ex-dividend during the formation of an Area Pattern of any type, the lines bounding the pattern should be immediately adjusted"
Now in my own experience, I have noticed that as time progresses, the adjustment becomes less significant, and the pattern carries on as before the dividend.
So for the days near the ex-dividend date, it is VERY important to adjust, but three weeks or later, it generally does not matter as much.