Tuesday, December 07, 2004

Times like this are great for revising your watch list

In "Reminscences of a Stock Operator", Larry Livingston talks about selling probe positions into strength to see how the market absorbs the shares. If the shares were gobbled up, he would buy back all he had sold, and a lot more because he knew he wasn't the only one buying. I don't have the money to move markets, but other people do, so I'm letting them do this probe-work for me by watching where lows hold in the market averages and in individual stocks. It will be very interesting to see where the naz finds support over the next few days because it has went almost straight up for a month. I don't think it will retrace that entire gain, but if it does, I'll be mostly in cash.

It became pretty obvious after the first day the naz hit resistance near 2155 that it would need to consolidate before it could push up into new high ground for the year. Over the last week I have stopped out of everything except for AMD, but I haven't been putting on new positions because after I buy, I need at least a week of strength in a stock for my sell-stop to get a foothold that won't whipsaw me out at a loss, and the risk of a big down-day like today was just too high recently due to how "overbought" the market has been since the election. I am watching closely to see how far down stocks will be allowed to fall. If we make a convincing higher low and then start to move up again on expanding volume, then I will feel confident buying stocks.

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