Reminder: Harlan is available to chat with Members, comments are found below each post.
Courtesy of David of All About Trends
So now what? As far as the indexes are concerned and given that the Full Stoh’s on the 60 minute charts are in nosebleed territory we’ll need to work that overbought condition off. We’ve talked numerous times in the past about how the markets do that — Sideways or Pullsback (think backtests).
So what about those gaps? Well for one thing by now we should all be getting used to them and how to handle them. It’s extremely frustrating, we understand that. However that is just the way the market is. We’ve talked numerous times throughout the year about traits that top traders have and one of those traits is that of being able to be successful regardless of what the market throws at you. Like we’ve said, if you can successfully navigate the rapids of this market this year in the end you’ll truly find out what you are made of and ultimately be able to handle anything the market throws at you. That’s the positive in all of this from an individual’s perspective.
So what about them? For us there are two ways to play them and the main way is exactly the way we have and that is buying in the face of fear on pullbacks in technically oversold markets and then? Sweating it out while being in what we call "The Zone".
Sure we tend to go under water a bit at times but we know better than to trade from the hot money perspective of "I want my instant gratification". That’s a fast money, hot money losers stance. See the folks who chased Paulson’s hedge fund performance over the past year? This guy is down huge this year. But he’s a star right? Give us a break, it’s always the same. Those who chase buses via stocks, funds or managers always end up with the same result — wishing they hadn’t. This isn’t the 90’s anymore. In the 90’s secular multi-year bull market cycle if you screwed up it was no biggy as the market bailed you out if you just sat through the corrections. That’s not the case anymore as the indexes haven’t gone anywhere in years.
So that’s one way, buy the dips when it looks ugly out there. But what if you see a day like yesterday the market is going to gap up huge, after being down multiple days that is — that’s a key ingredient you need to have too.
What do you do? Well in those cases you go to your watch list (which should always be handy) and you have to either jump in at the open like we did yesterday with CVLT and NUS.
OR
YOU WAIT FOR THE BACKTEST OF THE INITIAL POP.
Below are two examples of just that in short term time frequencies.
Right now though we are going to sit tight as the indexes need to digest if higher and we’ve got some short term resistance levels just above as shown in the charts below.
11-29 Let’s just take it easy here and see if as we go out in time this market can stay up in here and digest its recent pop. Sure would be nice if the indexes can get to the blue and red lines but the market is the boss not us. Should they do so we’d be more apt to look at locking in some gains and reducing exposure.
SHORT SIDE WATCH LIST
NONE — 11-27 WE DO NOT CHASE BUSES OR SHORT STOCKS THAT ARE EXTENDED TO THE DOWNSIDE.
And that is exactly what you would be doing by going short here as you are late to that fast and furious party. Just remember like we’ve seen this year markets can spin on a dime. This means both directions. We’ve seen big swings higher and big swings lower all the while lesser emotional types get whipsawed and tend to make emotional decisions at the absolute wrong time.
Said another way buying strength as we’ve shown you (unless you caught that first up day and were a super fast get in get out trader type) has been a losers game. The flipside to that is that shorting weakness has also been just as deadly a game like we’ve shown you (unless you caught that 1st down day and were a super fast get in get out trader type) at the August lows and Oct. lows. Keep in mind at the Aug. and Oct. lows everyone then was super bearish and the news was just as glum, that’s exactly what one wants to see, hear and feel at lows.
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LONG SIDE WATCH LIST
"Only The Best And Forget The Rest "
"We Trade What We SEE, NOT What We Think, Hear Or Fear "
GLNG
NUAN
FFIV
NEW NAME TO WATCH and we stress watch due to today’s action
SLAB
NEW NAME TO WATCH
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FEATURED BUT NOT TRADE TRIGGERED BY US LIST
GLD
.
OIH
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CURRENT POSITIONS
"Let Your Stocks Tell You What To Do By The Action They Exhibit"
NOT YOUR EMOTIONS!
LONG SIDE POSITIONS
NUS (We are long 250 shares of this at 46.42 as of 11-28-11)
CVLT (We are long 150 shares of this at 45.58 as of 11-28-11)
FIO (We are long 250 shares of this at 30.65 as of 11-25-11)
AMZN (We are long 75 shares of this at 204.56 as of 11-18-11)
DECK (We are long 100 shares of this at 102.67 as of 11-17-11)
11-17 We did some nibbling on weakness in the face of fear at trend channel support just like we always do. Now? We sweat it out . So what IF (not saying it’s going to not saying it isn’t as I have no clue and neither does anyone else) this issue went down to the 200 day average as the markets tag the 50 day support level? Well we’d be down about 11 points or around the 10% mark. IF that were to happen should we stop out knowing its a support zone just because we’d be down 10%? or 1/2% of one percent impact to the overall portfolio? Nope.
RAX (We are long 250 shares of this at 42.54 as of 11-15-11)
11-20 Recently we’ve touched upon using the 50 day as a guide. A point we want to make with this issue is that it could come down to the 50 day average and you know what? Its uptrend would still be intact.
BIDU (We are long 100 shares of this at 136.25 as of 11-11-11)
VHC (We are long 300 shares of this at 21.64 as of 11-11-11)
WFM (We are long 150 shares of this at 66.48 as of 11-10-11)
BWLD (We are long 125 shares of this at 64.13 as of 11-4-11)
(We are long 75 shares of this at 62.33 as of 11-10-11)
11-27 Friday’s action wasn’t pretty but that’s holiday trade for you.
AAPL (We are long 25 shares of this at 398.56 as of 11-1-11)
(We are long 25 shares of this at 391.78 as of 11-10-11)
11-21 Our notes from 11-10 still apply to this name.
11-13 Recently we saw a few blurbs about how this issue is totally damaged because its below the 50 day. We get that on the surface HOWEVER look at the overall trend of this stock. It doesn’t trade off the 50 day, it trades off of a big green trend channel.
11-10 So lets play "What If" . What if this issue goes to the green trendline? Well first off its a support level. So would we want to stop out there? Knowing its a support level? And if it were to blow thru there and head to the 200 day average at 262 would we want to stop out there? Knowing its even more major support?
What impact would that have to the total value of our portfolio IF (not saying its going to not saying its not as I don’t know neither does anyone else) it went to the 200 day?. Let’s see we own 50 shares at 395.17 and this issue makes up 11% of our total portfolio. So IF it were to go to 362.00? we’d be down on the position 8.3% on its own. But what about the total impact to our overall portfolio? 9/10ths of one stinking percent!
On top of that? IF we would go there and stop out (which we wouldn’t do because its only a moment in time subject to the next moment in time) it would be a 1658.00 dollar loss. know what? We are up 3300.00+ for the month. So now how much damage would that be to us.
By using trade size risk management it really allows us to never really get flustered or in trouble. This allows us to always stay centered and objective because it really doesn’t mess with our most important asset which is our state of mind. Folks use this conversation as an example for yourself to think things forward and thru. It really helps calm the mind.
MAKO (We are long 100 shares of this at 37.37 as of 11-1-11)
SHORT SIDE
NONE
