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Thursday, April 01, 2004
Good evening friends,
Market: Recap
The NASDAQ could not get through the 50 SMA which stands at 2023. It is going to take some major volume for it to break above this level. The good news is that it closed above the psychological 2000 level. The close poked just above the down trend line that I have been showing on the NASDAQ chart.
With strong employment numbers out in the morning, we may have a nice rally and a gap up above the 50 SMA. I have been positioning our portfolio for a rally above the 50 SMA by covering short positions and going long on many stocks. I was hoping that we would close at the high of the day but 4 points shy is not bad; a close of 2015 today is close enough to the 2023 level.
Market: Look Ahead
Tomorrow we should either break above this level on good numbers or sell off if the numbers are a disappointment. I am looking for an upside breakout, but at this point it is very hard to call. Anything can happen, so keep tight stops on all these long positions we just opened.
I like the fact that we closed above the trend line (see chart). That is very positive, the only question is the volume, it has been less than what I would like to see but maybe tomorrow we will finally get some real volume. We currently have 14 long positions (ISO is a double position), or 70% in stocks and 30% cash.
NanoTechs
Nanotech stocks were hot today. Merrill lynch is coming out with a nanotech index because they think Nanotech will be the next Internet-like boom. If you look back, about 5 or 6 months ago I mentioned the Nano techs would be hot. They were on the move when we bought them at the end of last year but they fizzled out.
This Merrill news has these broken charts on the move again. No need to chase these stocks, we will buy when the charts set up. Nanotech stocks will always be here, so let the heard react as they did today, we will buy the pullback later.
Baseball season has arrived and as many of you know, I coach little league baseball and love the game. The football analogy went over well, and with the baseball season getting ready to start I thought I would tie in stock trading to a baseball analogy tonight.
What's your batting average?
Ty Cobb is perhaps one of the best hitters to ever play the game. He has the highest career batting average of any player in the history of the game. He had a hit about every 3 trips to the plate for an average of 366. In other words as good as he was, he failed 2 out of 3 times.
The average is very important to stock traders as well. We can get 1 out of 3 trades right and still make money in the market. You have heard me say it many times, “cut your losses quickly, and let your winners run”. Those are not my words, but they are good words to follow. If we live by those guidelines, we can be right on stocks about 1/3 of the time and still grow the bottom line of our portfolio.
During his career, Ty Cobb only hit 117 home runs in his career (for us, that would be a massive gain in a stock), yet he is still considered the greatest hitter of all time. It is because of his average (for us, that is consistency). We will not always find the stock that goes up 100%, but we will consistently find gains to grow our portfolios far ahead of the market.
The truth of the matter is that finding a stock that goes up even 50% is a great find. We have found perhaps more than our share of stocks that have given us tremendous gains in the past. I am also very confident that when the market turns around, we will continue to find stocks that fit that description. The key to winning is being consistent.
We need to be consistent both in our methods for locating stocks, as well as how we handle our trades. That is why you can be right less than half the time with stocks and still make a fortune. (I tried adjusting my trading as the market started to decline, because I had so many people asking why we were not trading. We made some bad trades because of that. Had we stuck by our game plan, we would not have gambled on stocks like ANCC. I stepped away from what I knew. I became in-consistent and got burned for it. It is the same as if Ty Cobb, who was a lefty, suddenly tried to bat right. His consistency would be gone, and his average would suffer because of it.)
So, the name of the game is consistency. We have a game plan. If you doubt the game plan works, just look at our overall trade record. We have seen some tough times, but we will bounce back as we have had before, once the market has determined which way it wants to go. When times are uncertain, that is when it really pays to stick to your plan. Just remember to be consistent. If we are, our ‘batting average' is going to continue to get better.
Those OTC BB's stocks keep running:
- WWAT (up almost 100% since mentioned 5 days ago)
- PLKC (consolidating, could go either way)
- IPVO (breaking out now. A beautiful Chart)
- PRGF (closed at high)
- ULTR (forming flag, should move soon).
- GDLS (up 200% since mentioned here and ready to run again. Pennant breakout soon)
As always, thank-you for your support past, present and future! Have a great night everyone; we will see you all Sunday evening.
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