Penske Fizzled at Its All Time High

Learn Trend Following: Avoid Stock Fizzle Outs like PAG's upcoming 50/200 DMA Death Cross

Penske Fizzled at Its All Time High
Photo by shaun Bexley / Unsplash

The thing with stocks reaching all-time highs is that they fizzle out sometimes. That's exactly what happened with Penske Automotive Group (PAG). I first featured them in my Weekend Market Summary saying that I'll keep a lazy eye on them, and I did.

Sad to say but PAG hit its all-time high back in mid-July 2023, created a double top, and sold off. It's now trading at $152 after hitting the $180 price level. This happens a lot, stocks make an all-time high and then fizzle out. How do you find stocks that don't fizzle out? You do a lot of fundamental research and base your buying decision on that. Of course, you should always manage your risk with stops and sizing your position right.

Regarding risk, I like to use about 1 to 2% of my portfolio value as the risk and back-calculate the stop. I'll use a trailing ATR type of stop and will only move it for my Python scripts tell me so.

PAG Stock Price, (c)

Looking at the stock chart I see that it's trending lower and about to do a 50/200 DMA death cross. Considering that a Santa Claus rally is shaping up in the markets right now, this does not bode well for PAG.

PAG is a laggard in the market and you want to put your money into the winners. Winners have momentum and continue to make new highs or at least move from the lower left to the upper right of a chart.

The reality is that you're going to pick stinkers, just like PAG, but trading and investing is a numbers game. You have to be in it to win it. Just be smart.

Learn Trend Following

Want to learn trend following? Grab this free download and read up on the empirical analysis on how trend following has a positive expectancy.

Does Trend Following Work?
As long as you’re disciplined at moving your stops, you can just “set it and forget” until the trend flips and you’re taken out.
Trend Trading in Excel
Use Excel to build a Stock or ETF trend trading system. It’s pretty easy!