Chart Request: Rackable Systems, Inc. (Nasdaq:RACK)

Daniel asked about RACK this morning before its nice 7% gain today:

If possible I would like a chart request upon RACK.

To be truthful, I believe in the company and its products, and having seen that it has gone down I jumped in, and to be truthful I am down now. I was up in a couple of times but thought that it could go higher (because I believe in the company) so I decided to go long.

Now it is hurting!

I have bought at 37.43 and at 39.35

In response to the part about believing in the company I say be sure to differentiate between the company and the company’s stock. This decade is littered with great companies whose stocks got crushed. Duru had this to say about Daniel’s message:

Tell this guy the company may indeed by fine but in the short-term the market doesn’t care!… and by the time the market is done with it…he may not care either! :-O

The point is that you should decide your exit point (define your risk!) before you enter the trade. If you’re experiencing pain then obviously you’ve let it go too far against you. RACK could easily bounce back to its trendline (around $38 at the moment) so it may actually give Daniel a chance to get out at break-even. But the potential downside is what I’d be focused on. After the support around 30 (also where the 200-day moving average is) there’s not much support on the chart until under $15. Now that would be painful. Trailing a stop, or simply putting in a stop at yesterday’s low may be a good insurance policy.