This past week was devastating for the bulls. We have broken a few key supports. Daily and weekly time frames are very bearish. The bulls could use some caution here. You do not have to trade every day. Of course this does not apply to day traders. Day traders will have to trade every day. That is what defines day trading.
Seldom do stocks drop or go up in a straight line. They zig and zag, which makes trading hard. Let’s say you are very pessimistic about our economy. You have the general direction right, which is going down. Nevertheless if your timing (entry) is not precise, In other words, you zag when the market zigs, you will still lose
If you were following me on Twitter, you know that I shorted FAZ on Friday. I also mentioned it that I would short it Thursday night on Twitter. The first 2 shorts were placed not long after the market was opened. I had a quick paper profit but I did not take it. My plan did not allow me to take that kind of profit. The stock reversed and took out my stop. So I had a loss of 1500 in the AM. I shorted it again in the PM . It did not hit my target either. I closed it before the market closed because It was a day trade. That one trade brought in 3700+, which was more than twice as much as the amount I lost.
Here are a few good things I did and I will try my best to repeat them
- Solid risk management
- Never try to catch tops/bottoms
- Ride winners
In summary, I stick to my game plan and I only listen to what charts are telling me. See my real time updates on Stocktwits
Although the big picture is bearish, it does not mean there is no hope for a sucker rally next week. For short swing traders like you and me, a sucker rally that lasts for a few days is good enough. I think the probability of this rally occurring next week is over 60%(fuzzy logic ^_^ ) because the dark cloud has formed in FAZ and SRS. I am already prepared for that as we can see from my portfolio I am long on MOS and SOHU. POT and MOS are same stocks. They are the sector leaders of the fertilizer stocks. Either one is good. I think I might add one oil stock(OII) or just ERX. All these stocks are on the long side. They have something in common. It is not very obvious. Let’s see how they play out next week. I hope they can prove my theory which I will reveal in the future if it is correct. Please feel free to provide your observations in comments below
60 Min Charts. To have a better view, just click on them.
MOS
SOHU
POT
OII
Good Luck
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