Portfolio Protection - Reentry Alerts

Have you ever exited a stock that was showing weakness only to watch it return to a strong upward trend? Are you hesitant to temporarily exit long term positions to avoid seasonal or news related risk because you struggle with knowing when to get back in?

The SmartStops Reentry Service is here to help.

Once an equity has trigged a SmartStops indicating that it is experiencing abnormal risk, the SmartStops reentry service begins monitoring the equity for signs that the risk profile has returned to normal. When a reentry trigger is hit, an email alert is sent enabling you to make a timely reentry decision.

How Reentry Alert Works

Once a position in your portfolio triggers a aggressive or conservative exit, a reentry value will begin appearing in your portfolio table. Just like the exit triggers, this Reentry trigger will change over time.

If the equity price rises enough to hit its Reentry price, it is an indication that the risk profile of the equity has returned to normal and an email alert will be sent. This may be a good time buy back in or take off any protective hedge you had put in place.

When a Reentry is triggered, an email alert will be sent and the triggered reentry will appear on the chart.

Once a reentry trigger is hit, no further reentries for that position will be published until once again a short term or long term SmartStops exit is hit.

When combined, SmartStops.net exit and reentry alerts provide a powerful and easy to use solution helping investors sidestep periods of abnormal risk to improve returns and achieve peace of mind. See SmartStops risk alerts and reentries in action.

The Power of Sidestepping Periods of Abnormal Downside Risk

The following chart shows the performance of a $1,000 investment made in General Electric (GE) over the course of 2009. The red line charts the daily closing value of your investment following a Buy & Hold approach. The green line charts the daily closing value when sidestepping periods of abnormal risk by following the SmartStops aggressive risk and reentry signals.

Notice the 3 flat periods experienced when following the SmartStop exit and reentry signals. During these periods of abnormal risk, your position is safely in cash or hedged and not exposed to further downside risk.

Frequently Asked Questions About Reentries

Q: Why do we need reentries?

A: The SmartStops exits are intended to help you get out when the prices are falling and the SmartStops reentries are intended to let you know when that temporary period of abnormal price weakness has ended.

The magnitude of the price weakness to be expected following a SmartStops signal is unknown. Usually the abnormal price weakness identified by SmartStops is only temporary and at some point in the future an upward trend may resume. The basic premise of the SmartStops logic is that when a stock is weak it is safest not to own it. However when the stock is no longer displaying abnormal price weakness you may want to buy it back in order to make the profits you intended when you selected that stock in the first place.

Q: Does a SmartStops reentry mean that the particular stock identified is one I should buy?

A: No. SmartStops does not tell you what stocks are good or bad. The selection of stocks to own is entirely up to you and you should seek professional advice and do your homework before deciding what stocks to buy. However SmartStops provides a valuable service in letting you know when a stock that you purchased has entered a temporary period of abnormal price weakness and is likely to decline further. The SmartStops reentry service informs you when the previous period of unusual weakness has ended and the stock's price action has returned to normal.

Q: Does a SmartStops reentry signal indicate that a stock is going to go up now?

A: Not necessarily. The reentry signal means that the abnormal price weakness has ended but there may be some “normal” price weakness from time to time. The stock is most likely to go sideways or continue upward after a reentry signal. If the stock displays any abnormal price weakness a new SmartStops exit alert will be signaled.

Q: I own a stock but I do not see any reentry for it. Why is there no reentry showing for this stock?

A: Reentry signals are only published on positions whose previous trigger was a risk alert. Once a reentry has been hit indicating that the risk profile of the position has returned to normal, no additional reentries will be published until an aggressive or conservative SmartStops risk alert is triggered again.

Q: How effective are the SmartStops reentries?

A: They are very effective at making sure that major upward trends are never missed. However they are not effective at generating a buy signal at the bottom or lowest price available after an exit signal. The SmartStops reentries always occur after a sufficient period of strength has signaled that abnormal price weakness is no longer present.

There are many entry-oriented services and many useful technical indicators that might help you to enter closer to the bottom after a period of weakness. SmartStop reentries are not intended to do that.

Q: I am using the conservative SmartStops signals for my exits. If a reentry is signaled as the result of a previous aggressive exit does that effect my long term position?

A: If you took no action based on the previous aggressive exit signal then you don’t need a reentry and you can ignore that signal. However the reentry signal can be viewed as good news because it indicates that some short term weakness that might have caused your long term position to decline temporarily has now ended.

Many SmartStops users combine both the aggressive and conservative exit signals. They typically sell part of their position on the first aggressive exit and then wait for a conservative exit to sell the remainder of the position. In this case a reentry after an aggressive exit would be an indication that it is now safe to hold the full long term position again.

Q: Are the reentries affected by the general trend of the particular stock?

A: Yes. For a stock that has been in a prolonged downtrend the reentries will take longer. The reentries will occur much quicker for a stock that has not displayed as much sustained price weakness.

Q: Are the reentries the same as the 20-day breakout strategy that was used in many of your research examples?

A: No, but they are similar in that the reentries are triggered only after a period of strength.

Q: I have a portfolio of ten stocks and I subscribed to the reentry service but I have not seen any reentries. Why is that?

A: Remember that a reentry signal will only occur after an exit signal and that the original one-time reentry signal remains in effect until another SmartStops exit occurs. Perhaps your portfolio of stocks has been strong and there have been no recent SmartStops exits so no reentry signals are required. It is also possible that the original reentry signals occurred before you initiated your reentry service so you did not see them.