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Thursday, May 12, 2005
Market Recap
The battle continues between the bulls and the bears. Every time the bulls mount a rally, the bears come in a sweep away all of the gains. The market crumbled again today under a relentless attack by the bear camp. The DOW suffered another triple digit loss, down 110 points. The NASDAQ fell 8 points and the S&P dropped another 12 points. The NASDAQ's high today was 1982 and the 50 SMA is 1985 so it could not get through that resistance level and promptly reversed course. There is also a very negative development on the NASDAQ chart and I have that for you tonight in the chart section. The DOW closed near its lows after being turned back from its 200 SMA 3 days ago. These moving average resistance points are proving to be very reliable turning points for the market. The DOW's 50 SMA is also slanted down and this is another negative sign. The S&P closed a shade above its 200 SMA but closed below that support/resistance line of 1163 that I have showed many times in the chart. It sits at 1159 tonight.
All and all, it is still not looking good for the bulls. If you are trying to go long in this market, you are fighting the trend. The charts of the big indices have been forecasting lower lows for awhile now. It is best to be in cash if you cannot short stocks and if you have to be long, make sure that you are in the strongest stocks in the market. We have identified several of these strong stocks on the bulletin. Our short positions came back from the dead and many continue to fall from the recent weak volume rally that we knew could not last. As of today, the STHQ portfolio has 7 open long positions and 8 open short positions.
The Flip Side
There is a flip side to being patient. Last night I discussed how patience is a virtue, particularly when it comes to salvaging a trade. We do not want to put our portfolios on automatic pilot and sell a stock or cover a short position the second it hits some magic number. There is no magic number when it comes to stocks and I have tried to explain this before. The 2%, 5%, and 10% stop losses are just guides. Stops should be strategically placed at technical points in the chart and then be patient with them once they are placed. Patience and a lack of emotions in your trading is one of the biggest lessons you can learn. If you can remove the highs and lows from your trading, you will function as a professional. You will not be subject to the panicky buying and selling that is so much a part of the market. If you can conquer your emotions, you will be a better trader.
So what is the flip side? The flip side is in knowing when it is time to walk away. As Kenny Rodgers would say, “know when to hold ‘em, know when to fold ‘em”. This illustrates that there are times when we want to hold and try to salvage a trade and also tells us that we must be willing to walk away from a trade gone bad and live to trade another day, as we did with CRS today. I was holding to salvage the trade in hopes of a recovery in the stock. I had to face the music today when it dropped below its 200 SMA. There is a calculated risk any time you hold a stock that has turned on you. It can improve and you can salvage that trade or it can continue to work against you. There is a point in time when you have to realize that you have a loss on your hands.
The Professional Trader
The professional trader knows how to recognize when it is time to sell and move on and they will do this without complaint. They know that time is money and they do not want to sit around wasting time on bad trades when they can take that cash and put it into a different trade. They do not get upset over the trade and then go on a rampage in an attempt to get back what the markets took from them. If you do that, you are most likely trading with emotion and that only compounds the problem. You will have short term set backs, everyone does. Recognizing that you cannot win every trade and knowing that losing trades are part of the game, will make you a better trader. Nobody wins 100% of the time. A successful day trader is wrong 50% of the time or even more, but he makes money because when he is wrong, he is out quickly with minimal loss's and when he's right, he stays in the trade and rides the train all the way to the bank before getting off. His winning trades far exceed his losers in dollars. His percentage of winning trades may not be high but his bank account is and that is why he is still making a living trading.
”My Notes”
We would like to introduce a new feature on the website, “My Notes”. This link is located in the top right corner. It is an area where you can store notes for yourself in an organized manner. Just click on this link and a note pad will come up, allowing you to save any trading notes you may have. I use this feature myself and it is quite handy. A big thanks to Mike Tojo, our webmaster for creating this tool.
STHQ Chart Index
If you go to the chart index in the left side menu, you can review and study charts that we have annotated for each stock listed in the past.
For New Members
For all of the new members with us, please make sure to read the link “How to use Bulletin” at the bottom of the Bulletin page on the website. It is critical that you know how to use this trading tool before trying to trade the stocks mentioned. The effectiveness of your trades will diminish if you do not completely understand how the information is presented.
Please Tell A Friend
Please tell a friend about our service. As always, thank you for your support past, present and future!
Earnings Calendar
We have added the earnings link for each stock on the bulletin. To access the link for earnings, you can either use the link below or click the link on the bulletin for the corresponding ticker. Click the online bulletin in the left side menu for access to the earning calendar for each stock listed. It is not recommended to hold a position through earnings. You can always buy the stock back after the dust settles.
http://www.earnings.com
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