How to come back strong, if you’re down
Last week, the market took a turn for the worse. A move like that inevitably
leaves more than a few traders caught off guard as they watch profits evaporate
and losses mount. The energy sector which had been such a leadership group for
many months saw many names take quick dives after making 52-week and, in some
cases, all-time highs. This likely left many traders scrambling to make a
decision — sell or hold?
Many traders tend to gravitate to the strongest sectors and the strongest stocks
within those sectors for trading. This is a good approach to trend-following,
but what happens when a move like last week comes around and you get smoked? A
reader e-mailed me over the weekend with valid questions about this very topic.
Here were a few of my solutions. They apply to a sector trade like the energy
plays, as well as to individual trades which sometimes just turn and misbehave.
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