Here’s A Stock That Looks Like It Has The Potential To Continue To Work Its Magic
Taking Some Heat
I took a lot of heat for Wednesday’s column on using mental stops to help
improve performance. I was simply expanding on what I wrote in the primer
section of
Dave Landry’s 10 Best Patterns and Strategies:
Q.
Do you use actual or mental stops?
A.
If I am distracted
or have many positions on, I will place an actual stop.
If I can watch a screen and not be distracted, I will use mental stops.
I will look to exit after my
mental stop is hit. In other words, I will
“trade out” of the position. In some cases, I end up risking slightly
more than intended, while in other cases the trend resumes, and
I end up with a winner. Mental stops do require discipline, though.
I’m amazed at the number of people who ask me for advice on
what to do with a position after they have losses of 5, 10, and even 15 points
or more. For these people, they should place actual stops
in the market. This makes controlling losses a passive decision and
not an active
one.
Q.
Do you carry stops overnight (i.e., good till canceled orders)?
A.
No, I allow the
stock to open and then place my protective stop. This allows
me to “trade out” of adverse moves. Again, this requires discipline.
If you find yourself being a “deer in the
headlights,” hoping for
a stock to come back, then you’re much better off carrying the
stop
overnight.
Q.
You mention that the low of the pullback is a target area for market
makers. Can you elaborate?
A.
Yes. The
“textbook” place to put your initial protective stop is right below
the low of the pullback. However, if this is fairly close to the entry,
for instance, less than those parameters given in the table on
page
15, then there is a high likelihood that it could be hit.
To my critics, since I don’t have time to answer all of your emails
personally, please choose the response that best fits you:
1. Kiss your mother with that mouth?
2. I know you are but what am I?
3. Yes, you are obviously much smarter than me. So, where can I read your
column?
4. I actually like you. You remind me of me when I was young and
stupid.
5. It sounds like English, but I can’t understand a word you’re saying.
6. Is your spell and grammar check button broke again?
On a serious note, to those who respectfully disagree, I hear you.
After all, we all can’t agree. If we did, there would not be a market.
Wait For Entries
Frontier Oil
(
FTO |
Quote |
Chart |
News |
PowerRating) has imploded since mentioned recently.
Fortunately, it did not trigger an entry–trade above the prior day’s high. As
you can see, waiting for an entry will occasionally keep you out of a
losing trade.
On Friday, the Nasdaq traded sideways throughout the morning, rallied
for much of the afternoon, and then pulled back late in the day. This action
keeps it well above its recent breakout levels (2100).
The S&P put in a similar performance. This action has it closing at its
highest level since December ’01.
So what do we do?
Nothing much has
changed–the market and most sectors look great. My
only concern is that the market remains overbought and due for a pullback.
Therefore, focus mostly
on areas that can trade independently of the indices. Metals & mining (less
gold and silver) and the energies are are good place to look here.
As far as setups, Talisman Energy
(
TLM |
Quote |
Chart |
News |
PowerRating), in the
strong independent energy sub-sector, looks poised to continue to work its
magic—looking like it has the potential to rally out of a pullback. However,
wait for an entry since it was down on Friday.
Free Stuff
I have Wednesday’s A/V presentation archived along with the
prior year’s recordings (covering scanning, sector analysis, picking the
best setups, position management, damage control, etc). If you would like
this file or the aforementioned primer on swing trading, shoot me an
email.
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. Learn my newest and most advanced version of my Bow
Ties Strategy. Click
here for details.