Alert: Hold ACN after It Closes Below Risk Point Accenture (ACN) closed slightly below its current Risk Point yesterday, and as promised, I'm getting in touch to let you know our next steps.
The bottom line is that we want to continue to own ACN, at least a little longer, because a rebound is more likely than not. There is little additional downside risk to holding our shares as we monitor the stock to see if it holds just above a key support level.
As you may recall, we use TradeSmith's Volatility Quotient (VQ) for our Risk Point prices. This is a special algorithm created by TradeSmith that scans years of price history to measure how volatile a stock is likely to be. It then calculates a volatility percentage for that stock, which tells us the price at which volatility is outside normal trading action and, therefore, potentially riskier than usual.
It is also a trailing stop, meaning that the price increases as the share price rises.
That's what happened with ACN, which we added at $332.15 on Nov. 28. At that time, our Risk Point was $262.80. Shares moved up roughly 13% through early March, and the VQ trailing stop rose accordingly. It now stands at $306.92, and ACN closed yesterday at $303.16.
Most of the time, we will respect the Risk Point and move on when shares close below that price. In this case, though, we want to hold at least a little longer.
ACN remains above a key support level around $290. It broke above that price last May and held above it on several pullbacks since. On a technical reading, we take on roughly 3% additional risk to hold when the data indicates a much greater likelihood of higher prices in the future than significantly lower prices. 
ACN's Quantum Score has slipped to 48.3, almost entirely because recent price weakness has lowered the Technical Score way down to 32.4. But here's the thing – the Fundamental Score remains strong at 70.8. When there is that big of a spread between the fundamentals and technicals, the fundamentals almost always win, and shares move higher.
Our current loss is relatively minor, with shares down 8.5% since we got in. And we need to keep in mind our goals here in TradeSmith Investment Report. We invest in stocks because of their long-term potential in the coming months and even years, so we will need to hold through ups and downs along the way.
Hold ACN for now. I will let you know if that changes and we need to adjust. I will also update you on Friday in the next Monthly Issue, when I will have a new recommendation for you. I'm finalizing the stock now and will have all the details for you then.
Talk soon, 
Jason Bodner
Editor, TradeSmith Investment Report |
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