Thursday, April 07, 2005

First buy since January

I haven't been long any stocks since January, but I'm willing to entertain the idea that the market may have some upside potential in the next couple of weeks. I have been browsing the "Bear trap" Point and Figure stock scans over at stockcharts.com because every now and then it comes up with a chart sporting a nice cup and handle. A couple that I had been watching for a week or so are BNN and NSI. Well NSI broke out this morning on high volume so I picked up a small position with a tight stop. If the breakout is legitimate, then I won't be stopped out and I'll be in a nice position for a market rally follow through (I cover my shorts when everybody else does).

A quick note about the charts of BNN and NSI:

BNN looks like a sweet cup and handle on a small weekly chart, but if you view a longer timeframe of data, you will see that it has run up quite a bit and is making a late stage base (although it is well-formed). The handle on BNN is getting a little long...

NSI looks HOT. On the dialy chart you can see where it broke through resistance today as accumulation buyers got into a panic. I would call NSI as a first stage base because it just broke out from the first base where the price was over $5.

I never ended up taking a position long in GRU. I figure it will make a higher low yet again before breaking out into new high ground. If it happens like this, then it will be a lower risk place to buy then when I was contemplating buying at $16.10 about a week ago. If it just keeps going into new high ground without basing first, then I'll miss the action, but thats ok. Speculating is all about when not to pull the trigger. I try my damndest to only take the layups.

1 Comments:

At 6:39 PM, Blogger KLP Investments said...

Hey John....

If Jesse Livermore were alive today...I believe that he would be on one of those long fishing trips down in florida breathing the fresh warm air...far away from Wall Street.

I am trying to appraise conditions currently...because it is conditions that affect psychology...and psychology that affects prices. Basically I'm saying that if we correctly appraise conditions(there are no charts for this) then we automatically correctly trade the market...and the major movements as well..rather than the fluctuations. Fluctuations will earn you a high rate of interest sometimes...but it is conditions and trends(a reaction to underlying conditions) that will garner the big money. So basically I don't see anything whatsoever in regards to conditions that will move this market up in a big way. 'Conditions'...this is what Livermore described as that irresitable force that pushes prices up or down...and as Livermore said nothing can stop an advance when conditions are bullish or a decline when conditions are bearish.

So in summary...I guess my sentiment on conditions is basically that I'm maybe short term bullish(still I choose cash)....and bearish longer term. We need a good wash out if you ask me. It would be productive to have stocks much more liquidated than they are today. Then and only then could we go from earning a high rate of interest(fluctuations)...to making a play that will in the end earn a killing(major trend).

I think as technically based investors..we are by nature 'top down' traders/speculators...so that means we start with conditions. That is at the very top...then and only then do we move to the market(most speculators think conditions and market are one and the same-they are not)...and then to individual issues. Sometimes I guess the market lags conditions because it takes awhile to reverse the prevailing bullish or bearish sentiment.

One thing about acting on conditions(or your interpretation of them) is that you have to really separate yourself from the crowd and act as an individual at times. Here is where it is critically important to size up conditions...then await confirmation that you are right before acting. Let the market confirm your judgement. Livermore said to forget about the first and last eighth of a movement. He said those are the most expensive eighths in the world. Many millions have been lost trying to catch them. Forget about them..as the money you miss by not being first in or last out will simply be the cost of an insurance policy.

Sorry to graffiti your blog. I am feeling a bit inspired!

I enjoy reading this blog.

Kevin Pickell

 

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