We are deeply oversold on a short term basis and although the market can get more oversold, the odds are favoring some sort of at least what we call a relief rally.
The most likely scenario is we see one of these countertrend rallies start this week, possibly as early as Monday or Tuesday. What we should be looking for a rally that could last only a few days if it is a weak one (which is most likely) OR if some sort of news catalyst that the market reacts positively, it could last longer BUT be prepared that this may not last long and any long positions should be sold into that rally.
At this point, don’t let any of the slight losses you have in the long positions bother you. The odds heavily favor us holding the long positions in anticipation that just a couple days’ rally would erase any of these losses
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market commentary, online stock trading, stock picks
Use trailing stop losses by the percentages you are willing to lose for a stock. The general rule is to have a stop loss that is about 1/3rd of the amount of profit that you are expected. So if you think USB, for example is going to $14 and you buy at $11, then you would set your stop loss at $10 or a trailing stop of $1. The trailing stop loss would trigger if your stock pulls back at least $1 off the high of any one trading day. Use the intraday charts to choose your buy or sell point to maximize your profits and reduce your risk.
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Investing, online stock trading
Let’s use a little common sense here with these bailouts and government actions. No government is large enough or has enough money to make up for all the mistakes that banks, mortgage companies, and individuals who bought mortgages that could not be realistically be repaid. The very thought that the government could help people pay their mortgages will bring that government to the edge of the cliff along side the people they are trying to rescue. I am not interested in politics but this just makes no mathematical sense.
The nice little pop we got in all stocks in the last hour which erased the earlier losses the indices were showing is likely going to be just that backing and filling action discussed the last few days. It seems most logical that the market drifts lower when people realize that the government bailing out homeowners would likely not be affordable or be passed into law. Then the details of that kind of plan and the bickering among various politicians and advisors that comes with it will likely splash cold water on the market and then there goes that last hour’s gains with even lower stock prices. That is a very likely scenario, the same kind of pattern we have been seeing for months.
The technical indicators are supporting the idea of lower lows and again to repeat yesterday’s report, that November 21st lows are probably going to be reached. If the market indices reach that November 21st low and is accelerating to the downside if it passes below and through that number, then we could likely get another very strong rebound that may last days to a couple of weeks that could give us more big profits similar to what we saw in the banks last Thursday and Friday. (Look at BAC, JPM, WFC, and others in your daily charts).
Tomorrow is Friday and it is Russian Roulette to buy stocks to hold over the weekend and with intraday trading SO PROFITABLE right now, that is the area to focus on. For those of you who have had a negative image of “day trading,” which is intraday trading or scalping, I would advise you to reconsider. After profit potentials in may stocks like examples below in just ONE DAY, try to open your mind up to this very powerful technique.
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online stock trading, stock market education
The stock market was down as much as 247 points on the Dow30 at the last hour and made a last hour comeback after a report of Obama considering making mortgage subsidies to homeowners. A government plan to subsidize troubled homeowner’s mortgage payments helped the Dow30 rebound and erase almost all of those losses. The NASDAQ Composite ended up 11.2 or .73%. This shows the market is not totally lethargic and dead but has some buying power and willingness to buy on good news.
It is like a hospital patient who is semi-comatose but can be brought back to life by a defibrillator (heart zapper). The Dow30 was close to a “dropping off point” to the November 21st lows. This isn’t just a psychological support line but probably a variety of triggers could occur from margin calls, more redemptions requests that caused a lot of October and November selling, and another cycle of retail investor’s fears. But again I say, we can make the most money in any market when we let the group herd follow each other down a path and then we position ourselves to take advantage of that non-thinking behavior.
For those of you who have studied the Wizard Training Course (or are about to), that is the very underlying thesis of the Bullshorts technique and I’ve made millions on that one technique alone. (Required statement: These results are unique and profits are not guaranteed!) So needless to say, I love group behavior. As a group in large numbers, people are not very smart. But for the prepared individual who is trained to recognize opportunities, the rewards are high.
So to quote myself…. “Money flows to those people who have had the best training, are the most prepared and have the most discipline and they take it from the people who have had the least amount of training, are the least prepared and have little discipline.”
Cut and paste this to a new document, enlarge it and tape it to your door or your bathroom mirror. Hopefully this motivates you to study this process of making money in the stock market more diligently and learn about yourself and observe the patterns that help or hurt your trading or investing decisions.
online stock trading, stock picks
online stock trading, stock market education, stock picks
January 30, 2009
One of the common mistakes for any investor or trader is to feel compelled to have to be in a stock position in order to satisfy the need to be having a chance to make money in stocks. There are times when it is best to be out of the market or when the market is in a transition from just finishing a “harvest” to waiting until the market is in a high probability buying environment. Today and yesterday is such a time.
The sectors that I follow from banking stocks to technology, ag-chemicals, oil & gas, housing, steel, food, retail and others are mostly in “no man’s land” where it isn’t a good time to get long or short because the odds are 50-50 at best.
Discipline yourself to wait until the market or a sector is ready to buy long (or short if that is your orientation). Take the big money center banks WFC, Wells Fargo, or BAC-Bank of America, or USB-US Bancorp, JPM-JP Morgan the week before last. I wrote in The Daily Stock Report the high probability set-ups in this sector. We just finished taking profits in this sector the last few days and now we look for other opportunities that give us high probability of making money but I don’t see many yet.
How about the November 21,2008 bottom in the whole market, not just in one sector but in almost all sectors. There is an example of an extremely high probability “set-up” to buy stocks long. Well, you get the idea. It is discipline and emotional control that keeps you from going into markets like yesterday and today where neither long or short ideas had high odds.
Take care and talk to you soon!
Mitch King
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online stock trading, stock market education, stock picks, stock trading strategies