Be A Lover Of The Big Blue Arrows
Each evening we focus
on the most interesting aspects for the upcoming trading
day. The comments are based on observations of the nightly
updates of the Stocks/Sectors and Market Bias pages. They
are provided for educational purposes only and are not
intended to be direct trading advice. Also, keep in mind
that these remarks are made up to 12 hours in advance of the
markets opening. Therefore, overnight events may alter the
outcome of these observations.
On
Wednesday, after chopping around for most of the day, the Nasdaq resumed its
sell off and closed poorly.
The good news is
that it only lost 27 points. The
bad news is that at these levels, that’s almost a percent and a half.
About the only good I could find is that the
VIX is once
again approaching panicky levels. Of course, this doesn’t guarantee a bounce but
does suggests that we are getting extremely oversold.
So what do we do? I guess I’m stuck in my oversold
market speech. To save you from hitting the archives, remember that oversold can
easily become more oversold, especially if you try to buy. On the
other hand, oversold markets often bounce, especially if you try to short them.
Therefore, I’d focus more on scaling out of existing shorts than trying to
initiate new positions. Let the markets come to you. There will be plenty of
opportunities to get short on the next bounce.
Looking to potential setups, Merrill
Lynch
(
MER |
Quote |
Chart |
News |
PowerRating) mentioned Tuesday night, still looks vulnerable.
I hate to pick on a $20 stock,
but here it goes: Peoplesoft
(
PSFT |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Lows List, looks poised to make another leg down.
Andrx Corp.
(
ADRX |
Quote |
Chart |
News |
PowerRating),
mentioned Tuesday night, appears to be resuming its meltdown.
Ballard Power Systems
(
BLDP |
Quote |
Chart |
News |
PowerRating), mentioned recently, still looks vulnerable.
Be A Lover
My trade in the direction of
the “big blue arrow” commentary seemed to inflame one or two of you.
Seems that I’m still a “trend following moron.”
I think I’ll use the
words of Leo Melamed, former chairman of the Chicago Mercantile Exchange, as my rebuttal:
“How much
better and more fun it is to be a lover. A trader who is a lover is a trend
player–the trend is his friend. He seeks out the trend of the market and
romances it. He loves the market whether it is bull or bear; he follows it
wherever it leads. If it’s in an uptrend, he’s bullish or leaves it alone; if
it’s in a downtrend, he’s bearish or he stays out. He does not try to pick
reversals or outsmart the world, he merely wants to follow the market’s
direction……Clearly, the lovers also have losing positions, but they never
allow them to become a fight with the market. Unlike the fighter, the lover
never closes his eyes with righteous indignation, I will be right. Unlike
the fighter, the lover seldom blames a loss on the market. He may be wrong, but
never the market.
It
is rare for a lover to catch the bottom of a market, nor will he often get out
at the top. At the bottom, he is most likely still short; at the top, he is
still long. As soon as he suspects the market is changing direction, he gets
out……lovers never want to be right, they just want to make money. In the
long run, only lovers do.”*
Best
of luck with your trading on Thursday!
P.S. Reminder:
Protective stops on every trade!
*source: “Leo Melamed On The
Markets”
“……I
appreciate the things you have in your book about trading psychology…..I have
found that the psych. part of this (trading) is a true challenge in overcoming
my own worst habits…..”
Randy M.
No risk, 30-day, money
back guarantee.