I’ve been buying and selling Zynga for over a year now, and whenever we get over $3.50 I get nervous. Yes I know things are different this time, but we’ve been here several times before and usually with the same results. So I decided to see what would have happened if instead of trying to guess the market, I simply sold Zynga when it went above $3.50 and bought it back when it went below $3.20.
For this experiment I decided to start my position on October 11, 2012 and for the sake of simplicity say that I bought 40,000 shares at $2.50. I also decided that I would consider my sales price to be 10¢ off the daily high and the purchase price to be 10¢ of the daily low. This would more accurately reflect the fact that you can’t time the daily highs and lows, but if you’re watching you can usually get a feel of when to trade.
10-11-12 Bought 40,000 Shares @ $2.50 $100,000 total value
2-11-13 Sold 40,000 shares @ $3.65 (high of $3.75) $146,000 total value
2-20-13 Bought 46,645 shares @ $3.13 (low of $3.03)
3-4-13 Sold 46,645 shares @ 3.57 (high of $3.67) $166,522 total value
4-2-13 Bought 52,864 shares @ $3.15 (low of $3.05)
4-3-13 Sold 52,864 shares @ $3.53 (high of $3.63) $186,610 total value
4-18-13 Bought 58,682 shares @ $3.18 (low of $3.08)
5-15-13 Sold 58,682 shares @ $3.53 (high of $3.63) $207, 783 total value
6-4-13 Bought 68,125 shares @ $3.05
7-11-13 Sold 68,125 shares at $3.50 $238, 437 total value
You could have more than doubled your money by following this simple rule. The interesting thing is that even though I missed the high of $4.00 and bought before the Morgan Stanley downgrade drove it down to $2.55, I still generated a great return. So, does this mean I should sell tomorrow?