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Thursday, April 22, 2010

Challenge Project: Portfolio Management and McDonalds (MCD)

"Chess is an infinitely complex game, which one can play in infinitely numerous and varied ways." - Vladimir Kramnik

Well, for the last two months, McDonalds (MCD) has been on a tear. And it's getting pretty extended off of those moving averages, although it continues to follow this 5 day exponential moving average (ema).

McDonalds (MCD) - Daily Chart
(Can be Enlarged):

On the last few days, we've taken a bit of a breather in this new $70.00 region, while still respecting that moving average.

McDonalds (MCD) - One Hour Chart
(Can be Enlarged):

To tell you the truth? I'm a bit dismayed by McDonalds (MCD) performance. The reasons for that revolve around portfolio management. Because it's getting to a point, where I am thinking of taking profits here soon on McDonalds (MCD) for all of my accounts. Since he initial purchase was so small for the Challenge Project, I was hoping for an opportunity to average in more shares since the initial purchase at $58.38. Because I felt back when I purchased the stock at $58.38, that this strength would eventually manifest itself.

But that opportunity to add more shares never came. McDonalds (MCD) just took off, and never looked back.

So if I'm staring at a $72.00 or $75.00 stock, on which I have gained $2.20 in dividends, it almost makes sense to sell the stock, take the profit, and free up some cash. If we got a pullback, to say, $62.00, then I'd have to wait that time to average in, wait for the stock to consolidate, and then begin to rise again. And at some point, I know that tightening is coming of some sort within the next 15 months.

Just one of those things I have tumbling around in the back of my head. We're just at that point of ... "Do I take the profit or do I want to wait". The level we're at right now? I'm comfortable waiting, and averaging down, down the road. But any higher, and I have to start thinking about taking the profit off the table ...

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have over 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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