Nice Up Day...
Today was a strong up day. Unfortunatly for me, most of my new trade picks faltered pretty badly. The bounce that I was expecting in VCO and CU never happened. Even my micro-cap plays seemed to not want to participate in todays rally. What's going on? Could this day simply be an over-inflated bounce? Judging by the large amount of stocks that haven't reacted well despite the 280+ point rush, I would be slightly cautious. We were in oversold mode and in desperate need of a bounnce. Lets see how things work out for the rest of week...
posted by Nick M. @ 7:04 PM
11 Comments:
Yeah, nothing's worse than seeing that it's been a good day only to find out that you weren't part of it. I haven't made a profit on a stock in a month and half so I'm used to it by now. I think I'm going to sell everything and wait for the rebound before I get back in the market.
Do you think JDAS will rebound? I bought it when it was doing very well, but it hasn't posted a gain for more than a day and has mostly been doing poorly, including today. Do you think it's going to rebound any time soon or should I drop out? I'm -10% right now. My only other position right now is SCUR which posted a very mild gain today (1 cent, my luck). I'm down 5% on it but will wait for a few days before trading out.
Mateo,
JDAS is on the 50 day MA right now. Watch it near the close and see how it acts. If it attempts to close at the low of the day and seems weak, sell it. Also, if it fails to hold onto the 50 day MA, sell it. There is no reason why you should turn a 10% loss into a 12 or 14% loss or anything worse. You should try to set yourself a mental 8% stop loss. So if you see one of your stocks down 7-8%, you should sell it immediatly, no questions asked.
Anyways, the current market action is very tricky. A laterally or sidways trading market is the most difficult to interpret and trade. It is sometimes better to just sit it out and wait for a definite trend to appear (either up or down). I keep breaking my own rules and continue to try to trade this market. The only thing I should be doing is either adding to my winners or cutting loose my losers. Whatever you do, try to not lose all your money. If you do, you will miss out on the next bull market cycle. The big money is made in the begining of a new bull market cycle and no where else. The only problem is that we are not anywhere near a new bull market cycle. It is all about being patient right now.
Well, another good day and JDAS completely bombed yet again. Down 16%, good riddance JDAS!
Please tell me you go rid of it. I hope you see the importance of keeping a 7-8% mental stop loss on all stock positions. It is difficult to want to sell a stock that we bought.We always want to feel as if we are right in our purchases. Unfortunatly, this isn't always the case. By buying at a proper buy point (when the stock is not far from its 50 day MA) and keeping a strict 7-8% mental stop loss, you eliminate faulty (but normal) human emotions that cause us to make bad decisions. I hope you don't feel as if I'm trying to school you. I'm just trying to share with you some of the lessons that I learned the hard way.
No, I do not have the ability to trade at work, so I have to place my orders the night before.
This morning I read a news story that said the profits were up 75% in the second quarter so I decided to hold off hope for 1 more day (also the after-hours trades were moving upwards). More than that, the last 3 trades I've sold for a loss have rebounded shortly after I sold them (by that I mean 1 or 2 days after). But it was a mistake as the stock fell another 5% today. Now I have a market order to sell everything I have. I need JDAS out of my life. You are right though, from now on I'll just trade anything that falls to 8% no questions asked.
But make sure you buy the stock at the right buy point. If you buy a stock that is over-extended and not at a correct buy point, you will surely stop out of an 8% loss. If you buy at a proper buy point then you are significantly reducing your risk on your trade/investment. You want to make sure that you dont chase stocks that have gone up a lot. When and at what price level did you originally buy JDAS??
Also, it is difficult to trade from work. It is also difficult to interpret earnings results and how they can influence the price action of a stock in the future. Despite the good earnings announcement, the fact still remains that the stock did not act well. There was far more selling pressure than buying pressure. It sucks, but there is not arguing with the market...
Mateo,
here is something to think about. Even the world's best traders are only profitable 50-60% of the time. The trick is to cut your losses as soon as possible on a trade. Some traders have even more stringent mental stop losses of 4-5%. Still for longer term trades and investments, a 7-8% loss is ideal. BUT..it only works properly and in your favor if you buy the stock at a proper buy point...not if it is over-extended. Always keep that in mind and keep an eye on the chart and the different Moving Averages.
I have trouble knowing what is the "correct buy point". Today you recommended CVGW and IIN which had 11% and 9% increase days. These are not overextended? I bought JDAS on July 25, by the way.
Also, when you look at the SMA, are you looking at what time span? 1 month? What is the frequency you use? I use the month time span and JDAS has only recently passed under the 30day SMA.
I did not recommend IIN and CVGW today. I did recommend IIN over a week ago. I apologize about CVGW though because I never actually posted it on my blog. Nonetheless I have had a position in it for a while now (I recommended it on the Yahoo Message board and didn't get around to posting about it on the blog). I believe I recommended IIN on July 25. And yes, at the moment, IIN and CVGW are over extended. I recommended that one should've added to their pre-exisiting position in these stocks (if they had already bought earlier). At the time that I posted them as add ons, the stocks were not trading that high. I simply selected them as add ons because they were showing above normal strength. Also, don't use the 30 day MA. No one uses this as a technical indicator. What chart program do you use? Only use the 10, 20, 50 and 200 day MA. For trades, I use the 3 month time span. For indentifying chart patterns, I use yearly charts with week time spans. Does this make sense to you? If you need me to clarify anything just let me know.
Sorry, I mistakenly thought you had IIN and CVGW listed as new buys. So would you say that it's a bad idea to buy a stock that has risen dramatically (over 5%?) the previous day, as the stock might be reaching a peak? Sorry, I will stop asking so many questions for a few days.
I use Zecco which I think uses Bigcharts. They default to 30,60,90 SMAs. I usually change one to 10 and one to 200 though. I have been using the 1 month time span (and sometimes the 10 day), so I will try to go larger with 3 month and see if that makes things clearer. Thanks again.
I'm not saying it entirely a bad idea if a stock is up 5%. I'll try to give you an example. There are several good times/ways to buy a stock properly. 1. Finding a stock that has bottomed out. A stock such as this will have its 50 day Ma over its 200 day MA and will look it is slowly building the right side of its base. Other times that is a good idea to buy a stock is when they breakout. Stocks usually break out of bases. There are several different kinds and they can range from flat to cup-shaped. Sometimes they breakout of bases that have a handle shape. Most breakouts are news driven and usually occur because of good news such as earnings, new contracts and big money deals. You should always play breakouts as breakouts usually head higher. In this case, even though the stock has probably gone up over 5%, you can still get in and ride the momentum. A good example of this is PENX when it broke out because of great earnings. Real, event-driven breakouts are strong and carry big volume.
As far as Zecco goes, I'm not that familiar with them. I just know that they offer low commision. Do they offer real-time quotes or delayed? Yes change their default settings. Big charts is a good charting tool. It is the one that I exclusively use. I will try to post a section or thread on my blog that explains some basic charting techniques and how to spot breakouts and proper buy points. Once you see how these chart and price patterns look like, you will become more accustomed to spoting them. Also, I recommend that you buy William O'Neils How to Make Money In Stocks Book. It is a useful book that will help explain how to play breakouts and earnings momentum. I also suggest that you take a look at and study the charts of stocks that have performed well such as TRCR, TBSI, DRYS, TNH, FSLR, MFW, and CROX. These were some of this bull markets biggest winners.
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