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Tuesday, March 02, 2004
Good evening friends,
Market Wrap
If you like watching paint dry, you were in heaven today. Absolutely no movement until after lunch, then the bottom fell out. The Dow was down 86 points and the NASDAQ followed with an 18 point loss. There was no follow through to yesterday's rally, and the NASDAQ doesn't seem to have any life left. We needed to see follow through from yesterday's close above the 50 DMA and we did not see it. The NASDAQ caved back in, closing below the 50 DMA again. This tells us the NASDAQ bulls a running scared. I'm afraid the negative signs for this index just won't go away. A few bright spots during the day helped ease the pain. GUSH was up 30%, SPAB was up 20%, and EPMN was up 15%. If you owned these, then it should offset the otherwise sea of red.
‘The Gambler'
In his song ‘The Gambler' Kenny Rogers sang, “You've got to know when to hold them. Know when to fold them. Know when to walk away. Know when to run”. While we're not playing cards here, we are in essence, gambling. Any time you put money down on the direction something is going to take, you are “betting”. The herd is like the group of people you see at the slot machines. They have no system at all, they just sit there hour after hour, pumping money into machines (stocks), hoping that one will pay off big. It's an enormous rollercoaster of emotions.
The real professionals are playing games with less chance involved; they find the scientific games in the casino and stick with those. They know the odds and they choose the games (stocks) that give them the best odds of winning. They do this by choosing the best charts and leaving emotions at the door. Ever hear of a ‘poker face'? Professionals put on their ‘trade face'.
“Know when to hold them. Know when to fold them.”
When you first buy a stock and it goes up a few pennies, I see a number of people who are ready to sell. Same thing when it drops a few pennies. What everyone needs to learn is when to hold those stocks and when to fold them (sell). I've mentioned the use of stop loss orders to protect profits, and to prevent a huge loss of capital in case of a breakdown. Hence my constant reminder of “sell your losers quickly and let your winners run.” But stop losses that are too tight can whipsaw you out of a potential big winner.
“Know when to walk away. Know when to run.”
There are days when the market just isn't going to cooperate and it's not worth risking your capital to trade. So, you've got to know when to walk away from your trade screen and go enjoy life. I have mentioned many times before that we don't always have to be in the market. We can lock in our profits, go to cash and wait out the bumps. We can then return after the carnage when times are better to trade.
If we are going to trade in this tough market, know the risks that are involved. Know that we need to be quick to buy on dips and equally quick to get out of a position. I've been a little slow at getting out of positions lately, and that is because we have been shaken out of so many good stocks before.
People have asked me why I'm holding UPCS and DANKY. Here is the reason; I've listed some stocks below that I have been shaken out of. These stocks were either active trades or listed on the Bulletin, then dropped because of shakeouts. If we had just held, they are all up at least 100% and some much more. Look at the prices of these stocks when first listed on the Bulletin a while back, then look at where the high was since listed. It's a tricky market; sometimes we don't know what is a shakeout and what is a real breakdown. Even in these rough times, one thing is for sure, the market will become bullish again someday and when it does, we will be there taking advantage of it.
Some stocks I have been shaken out of
MEM .73 3.00
CACS 4.00 18.00
EVCI 3.50 10.00
CNXT 1.50 7.95
SWC 4.00 14.00
AUDC 4.25 16.00
CDE 3.00 7.50
EGHT .91 8.00
NOOF 3.88 11.40
TRPH 1.45 8.65
If you are wondering why I sometimes hold longer than the 10% loss rule, the stocks above should answer the question. You just never know if a stock will come roaring back like these did.
I'd like to make one last point: really focus on keeping your emotions in check when you're winning and when you are losing. An automatic stop loss takes the emotion out of the trade. I may not use them myself but recommend you do if you are the emotional type.
Some OTC bb stocks for your watch list are MXDY, NEOM, MDPA, CGIH, DSNY, and PKCY.
As always, thank-you for your support past, present and future! Have a great night everyone; we'll see you all Wednesday evening.
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