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Thursday, October 09, 2003
Good evening friends,
Another powerful rally at the onset of trading in the markets today but it all went for not as the profit takers came in and sold it off toward the close. Don't you love how the smart money operates? They shake the dumbobarries out buy dropping the NASDAQ down to trend line, buying near the 50 DMA while the amateurs are selling, then they ride it back up and when all the DB's think they are missing the next ride up, the pile in at a new high and the smart money sells it off. These same DB's who bought today at the highs will panic and sell again when the stocks they bought today and yesterday have pulled back to trend and support lines and the process will start all over again. This process is what forms the flag and pennant shape charts. They keep taking the 5 and 10 % losses and the smart money keeps making the 5 and 10% gains in these swings. Sooner or later the DB's become smart and no longer fall for this any more but it takes time for them to learn it. The smart money is not worried that the DB is learning because there will always be new DB's coming into the market every day. This is what makes a market. Folks the point here is, you have to know how you are going to trade before you start and stick with the plan. If you are a day trader, you need to hold very tight stops and take your profit fast when you have it. If you are going to be holding stocks for a week or 2 or 3, or a month or 2 or 3 then you can't react to every swing in the market or your stock. Make up your mind before you trade as to what you are going to do. We bought some stocks this week on breakouts and I said, “if you buy these stocks at the buy point, you can expect a 5 to 10% pullback if the market pulls back.” We are seeing it now. Our stocks are pulling back and some people keep asking what is wrong with them. Nothing is wrong with them. These are strong stocks, for example MANU closed today at 6.39 and we bought it at 6.53. This is down 2% from where we bought it. This is not a problem folks. The stock is still in a strong up trend and is above its 9 DMA, where the strongest stocks in the market hang out. Please decide: if you are day trading this stock, you would have sold when it was over 7.00 for a nice profit; if you are holding for a longer-term run-up, you are going to have to wait a little while. It doesn't happen over night. These stocks we are buying are higher priced than we are used to buying. I've said before that our strategy must change and not to expect these higher priced stocks to go up 100% in a day. That is not going to happen. Please understand the difference and unless your day trading, there is no need to keep looking at your portfolio balance every 12 seconds. The NASDAQ is in great shape and so are the stock we are long in. We are going to make money in the markets but not in the next 15 minutes, it's going to take a little time. I continue to look for stocks with good chart patterns and will have them for you when I find them. The wacky sell off and panic buying of the last couple weeks has the charts all over the map and hard to identify. The charts are slowly working themselves back into set ups and I mentioned before that it would take some time. The good news is, I am seeing a lot of stocks that are starting to form flag patterns. Just about the time these are ready to breakout, we should see another nice rally in the markets. Remember, this is now a full-fledged Bull market and we must buy the dips as well as the breakouts. Tomorrow is Friday and my guess is people will want to lock in gains. This could lead to more selling. This good because it will set us up for a strong week next week. Charts are real slim pickings tonight. Here's one for a day trade or to hold for a nice run up AV. I'll see you all Sunday night.
* REMINDER- I am coaching in a fall baseball tournament in Nevada on the 16-18 Oct. It's a five-hour drive so I will be leaving Wednesday night the 15th. Because of this, only a quick Bulletin will be issued the 15th. I will issue a full Bulletin from Nevada Thursday evening from the hotel providing I have connection. If not, there will be no Bulletin for that night. I will not be on the boards Thursday or Friday the 16th and 17th but will view all posts in the evenings from the hotel. This is the final baseball tournament of the season.
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