Tuesday, April 12, 2005

Gah! I hate days like today

Unless you are trading intraday movements, you don't really benefit much from these reversal days. I was long a couple lots of euros this morning and got knocked back to the flat position at 8:30 AM when we found out the deficit worsened, and the euro is now back on its way up! Same thing with stocks. I had a nice overall gain in my portfolio this morning, all my shorts were off a good bit and my single long position, NSI, had rebounded after coming within $0.01 of my stop. But as the day wore on I could tell something was fishy by the way stocks and the indices were acting. I was glad to already be in position because it felt like a big move coming, although I did not know in which direction it would be so making any new moves with my time horizon was too risky. Then BAM, most of my gains from the morning and yesterday retraced =/

Today's action was strong enough that I'll count it as day 1 of a rally attempt. As O'Neil teaches in his book "How to Make Money In Stocks", a strong bull run will be started when the market has a gain of at least 1.7% on above average volume on the 4'th to 7'th day of an attempted rally. This is when I'll take in my shorts and open longs.

Another reason I'm not covering shorts yet is that today had the same feel as that day at the end of June 2004 had, you know, when the fed raised interest rates for the first time that year and the market rallied!! Those who were around back then know what happened for the next month and a half, and for those who weren't I'll tell you. We had the nastiest sell-off of the year - it was brutal because it never even gave a relief rally to sell into. I remember so much talk about "oversold" back then, and well, eventually they got it right.. in late August.

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