Survivors React Fast

Chiron Corp (CHIR)
can teach us how important it is to be flexible traders. There is nothing wrong
with having a directional opinion of the market, but you should not be so
obsessed with your own ideas that you become inflexible. If the market is giving
you the opposite view, do not fight it. You must react to the new situation as
quickly as possible. Your pride may be wounded, but the most important thing is
to be a survivor.

Here is the daily chart of Chiron Corp as of the close of 7/12/2001. I’m sure
many traders have this stock on their short-selling list. Look how heavy the
volume was. It was nearly three times its daily average. No matter how I look at
it, this stock has to continue its decline.

As I expected, the stock gapped down
this morning (7/13/2001), but the reversal to the upside was quick and fierce.
The gap was completely filled within five minutes of the open. This was one big
warning to short sellers. The direction of the stock had clearly changed.

(The red horizontal line below is
the level of yesterday’s low.)

Remember, as individual traders, we
don’t determine the direction of the market. But by remaining open to all
possibilities, we can profit from it.

Have a good weekend,