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Monday, March 08, 2004
Good evening friends,
Market Recap
There was a 50 point swing in the NASDAQ today, with stocks looking good at the open, but an hour into the trading day a big reversal to the downside came. After that, it was a slow downward spiral the rest of the day. Folks, the NASDAQ is telling us to be 100% cash. However, contrary to what the NASDAQ chart says, the Russell small cap index tells us we should be 100% long small cap stocks. Because of this conflicting information, it's safe to be 50% cash and 50% long. We need to sit on the fence and not commit one way or the other until these mixed signals become clearer.
ANCC disaster
Today we played poker and lost big. I apologize for the bad call on ANCC. I don't often apologize for bad trades because most trades are calculated risks and made on good charts with low risk / big reward ratios. If a trade goes bad then that is simply part of trading, it doesn't mean we were wrong in taking the chance. But the ANCC trade today near the close was probably the worst Alert I have ever sent, and it was absolutely the wrong thing to do.
It figures, I sent an informational Alert for ANCC on Friday and the stock went up 60% by the close. But when I send an Alert for ANCC for the Trade Record, it drops out of the sky after hours on news. I will not succumb to the pressure from some subscribers to trade more often. We are going to get back to the conservative approach that has worked for us over the last 9 months. If there is no trade available, then we just won't trade. We cannot continue to force trades and be successful, so for all the people that have e-mailed me and said, “I'd like to see more trading for my money”, I'm sorry, but we're going back to what has worked for us in the past.
If we have to wait 4 weeks to make a trade then 4 weeks it is. You can best utilize any down time to study and learn from the charts on the website and by reviewing the all charts section for comments on past bulletin stocks. You can make use of the knowledge of all our great subscribers on our message board. There is so much to learn while the trading is slow, and our traders on the message board have a wealth of knowledge.
A 5% position in ANCC would not hurt your account much, so hopefully you didn't bet the farm. I said in the Alert that it was poker money only, and we were taking a big gamble with the trade. The company released a going concern statement from their auditors so this stock could go much lower. It's at 1.25 in After Hours. DO NOT average down on this stock. BAD, BAD, BAD trade.
Turn up the volume
When you're having trouble hearing something, you might opt to turn up the volume. When we want confirmation on the direction a stock is going to head, we want to see the stock turn up the volume. The one indicator that is missed most frequently is volume. The trouble with that is missing volume is like forgetting to put the cheese on the pizza. When it's missing, all the ingredients are not there. It's easy to overlook, but when it's not there you WILL know it.
Volume plays an important role, not only in finding a good chart to purchase, but in timing the purchase as well. It's equally important on the sell side. Volume is the key to confirmation. The best chart in the world will only go to new highs when there is sufficient volume to push it higher and to keep it there.
We've all seen fake outs. A stock climbs to a new high, only to fall back down before the close. An example of this is BRCD. The last two times I have traded it, it broke out to new highs but failed. If you look at the volume, it's no mystery why it failed.
You will often hear me say that a chart looks perfect, but the stock is too thinly traded for me to take a position. I don't want to get stuck in a stock. That happens when the volume is too low. Pay very close attention to the average volume that a stock trades at, if volume is above average then that will confirm a stocks movement.
I saw an entry for the Pizza Challenge this weekend that traded 400 shares on Friday. That chart might be the best chart in the world, but you'd never be able to get an order filled unless you paid the market price. Then, you risk holding that stock forever because the volume just isn't there for you to sell it. Their has to be a bid for you to sell and if there is no bid or the bid is low, you either sell for way less then you'd like or you don't sell at all.
We want to get in and out of stocks ahead of the herd. It is the overall market that begins buying a stock and sending it to new highs. It is also the herd heading for the exit door that causes a stock to drop and stay down. So I look for the best possible charts and then wait for the volume to confirm the movement in a stock. Once it starts to come in, there's usually no stopping it.
Some OTC BB stocks for your watch list include DYMTF, HIET, IPVO, URMP, MIVT, GASE, and GUSH.
As always, thank-you for your support past, present and future! Have a great night everyone; we'll see you all Tuesday evening.
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