Closing out Foschini long position

Our initial setup for the Foschini long position is posted here . While it didn't kick off well from out of the blocks, there was a dividend payout 2 days into the trade, which provided a useful underpin (and ultimately kept the trade in profit) and there was a significant positive movement  coming through in the week leading up to the close-out. In line with our trading plan, we implemented a hard-stop 5 days into the trade and started shifting it upwards using a 3 day low as a basis. Unfortunately following the severe broader market sell-off coming through today, our stop was triggered late in the day and we ultimately closed out for a fairly modest 0.4-1 gross reward-risk. As noted in the graph, the close of R148.72 was slightly below the entry of R149.50 but after factoring in a dividend received of R3.25 and costs of R0.89, we netted a profit of R1.58 per share.

A few things to learn/note from the above:

• Price may quickly recover and move in the direction of our original target but we are applying strict risk management criteria and one element of this is to apply the hard-stop and protect our capital. These things are always trade-offs but in our view the protection of our capital is more important than a missed profit opportunity.
• The stochastic has moved overbought on a daily basis and further short-term consolidation or retracement can be expected given how it has now crossed back below its signal line.
• The stochastic has made a higher high and price has made a lower high. This can be seen as negative reverse divergence which is also a bearish indication

So on balance we are comfortable with our management of this trade overall.