Stock Trading: Keep Your Trading Focus Sharp During Market Extremes
Stocks are rallying from major oversold lows – many of these lows below the 200-day moving average. The Dow is up more than 120 points. The S&P 500 up over 1%.
Are you buying or selling?
Whatever your stock trading discipline, be sure not to let Tuesday’s rally distract you from the rules of your chosen trading strategy.
For traders whose stock trading strategy is to buy stocks on weakness and sell them into strength, Tuesday’s big rally is an opportunity to exit positions, lock in gains, and move on to the next trade.
Remember, the goal of the short term stock trading – especially as outlined in Short Term Trading Strategies That Work: A Quantified Guide to Trading Stocks and ETFs – is to buy stocks when the edges are in your favor, and then sell those stocks before the edges fade. And if your approach to stock trading means buying weakness and selling strength, then you owe it to yourself, your trading account and your stock trading strategy to trade accordingly.
Again, your specific stock trading strategy may be different – and require a different discipline. What is important, regardless of your stock trading strategy, is that you remain as focused on your trading rules when markets are falling as you are when markets are – finally – moving back up.
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Here are 7 Stocks You Need to Know
News that ^JCP^ was getting a new CEO, Ron Johnson, former head of retail at ^AAPL^, sent the stock soaring by more than 17%. The rally sent JCP back above its 200-day moving average, a level the stock had been trading below for more than a week.
For their part, shares of Apple gained well ovwe 1%.
Energy stocks rallied into strength above their 5-day moving averages ahead of trading on Wednesday. Typical of the gains were the advances of more than 3% in ^NOV^ and more than 2% in ^WMB^.
What’s down on an up day? Pulling back above the 200-day moving average on Tuesday were shares of ^COF^ (below).
Shares of COF dropped by more than 3%, closing lower for the second day out of the past three.
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^FCX^ was among the bigger gainers in the S&P 100 ahead of trading on Wednesday. The stock gained more than 3% to close at its highest level of the month.
Up more than 5% below its 200-day moving average were shares of ^FNSR^. The company is scheduled to report quarterly earnings on Wednesday.
David Penn is Editor in Chief of TradingMarkets.com