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Monday, October 31, 2005
Market Recap
Friday's big rally continued today with stocks following through and tacking on big gains. The Dow gained 37 points but there was some selling in the last 30 minutes to take it down over 40 points from its high of the day - not a very encouraging close. Things looked super until this bout of selling took place in the last half hour. The Nasdaq and S&P experienced similar selling in the last 30 minutes but only finished off their highs by 5 and 4 points respectively. For the Nasdaq, it was a very good day as it managed to gain 30 points and close above its 50 SMA. This is normally a bullish buy signal anytime an index closes above its 50 SMA after being below it. The S&P gained 8 points today and closed above the 1200 resistance area but could not close above its 50 SMA which tonight stands at 1209.
As well as being a good day for the indices, many leading stocks had fantastic days as well. Leading stocks from our day trade watch list such as GOOG, SNDK, AAPL, ISRG and UTHR are doing great. If the market is going to start a year end rally, these are the stocks you should be in for maximum participation in the rally. October is over, November is here and after the Fed hikes rates tomorrow, that should be the all clear for the bulls to get back to business.
Guest Commentator tonight is “CmanG”
This commentary was written by one of our long time members. It originally was posted to our message board and we thought the topic and information was so good, it needed to be re-stated and emphasized in a full commentary for those members that do not read the message board.
Position Size
I think this is a topic that some people fail to discuss and I just wanted to bring it up real quick possibly to benefit some people who may be struggling with this issue (at times, myself included).
Having position sizes in your portfolio that are not too large, that you can be comfortable with, is an integral part of your success as a trader. Having too large of a position size can make you overly emotional which causes you to exit (or even enter) a trade at the improper time. Even, at times, too little of a position size can cause apathy. When I started trading (somewhat knowing about TA) a made the mistake of allocating large portions of my portfolio (1/3 to 1/2) to each position. This was a huge mistake. I oftentimes found myself panic selling during shakeouts, selling during lulls (coincidentally right before breakouts of course), and quickly locking in micro gains because I didn't want to give up since the position was worth such a large proportion of money which I was uncomfortable with.
This site has a great system which incorporates a 10% rule in its portfolio. This means that you allocate 10% of you portfolio to any one position. Think about it, do you ever enter a stock with the plan that you will stop out after the position loses more than 10%? Not likely (or, you shouldn't). Let's assume a loss of 10% as your absolute maximum loss on any particular stock. (As a side note, designating some arbitrary percentage, i.e. 5%, is a bad idea over using technical analysis methods. Please use TA). If you are using the 10% rule, 10% of 10% is 1%, which is, in theory, the maximum amount of your portfolio you will lose on any trade. That is a safe strategy. Take 1% of your portfolio right now; would you be ruined losing that amount of money? Of course not. This should be a comfortable amount for you. If you lose it, you live to trade another day and you can try again tomorrow and keep plugging away.
When I see posts on this board about people distraught over their positions that are going against them I cringe and hope they are not overburdening themselves with position sizes they are uncomfortable with.
By choosing a position size that you are comfortable with you can utilize all your tools as a trader and perform with maximum efficiency. You inadvertently put a strain on yourself with large positions which emotionally complicates a proper trading strategy.
*** This commentary was written by and is courtesy of Chris Guthrie “CmanG” Member of STHQ since Dec 2003. Thanks Chris for a great commentary from all of us at STHQ.
Stockcharts listing
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http://stockcharts.com/def/servlet/Favorites.CServ...
Thank you all for voting
STHQ Chart Index
If you go to the chart index in the left side menu, you can review and study charts we have annotated for each stock listed in the past.
Earnings Calendar
We have added the earnings link for each stock on the bulletin. To access the link for earnings you can either use this 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
For New Members:
For all 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 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. |
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