Posted by wallmann Over the years our particular trading style evolved from studying market We probably aren't interested in them that day for sure. If the entire So, we always try and give a few consider buys in various sectors on Tuesday, Thursday and Sunday. Each Another question that frequents our mail box is this: "Sometimes I buy a This is aggressive trading for sure, and not for everyone. A safer way to Remember these points friends, they will help you. We try and find an http://clix.to/wallmann
Link: More trading tips and picks
on 12/15/2003, 6:02 pm
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Often we get questions about the consider "buys" and we think that
their concerns speak to a wide audience so let's get down and dig into the
nitty gritty. One question we got recently was "Do we buy every stock
on the consider list?" The answer is a resounding NO!
moves, and how "news" moves the globe, the
markets, sectors and individual stocks. Well as we have shown you many
times, we can find a perfect chart in a moving sector and say something
like : "okay folks, MRK is forming a perfect cup and handle, the sector is
hot and we would buy MRK on a move over 75.50" Then we awaken the next day
and find out Merrill Lynch has downgraded the entire drug sector. Do you
think we are still interested in MRK? (Easy now, this is a trick question.)
sector does take a hit over a downgrade or an earnings miss, we sure
don't want to catch the falling knife. But we don't forget about MRK
either. Often a downgrade may only take the steam out of a sector for one
day or two at most. So if we see MRK working back to that breakout area, we
will go in at that time.
day brings news and who knows what will hit at 9 am and what sector will
win or lose because of it. But if we have a nice selection of good
possibilities in several sectors, chances are great that one of the
sectors is going to be warm, and the stock we picked in that sector will
do well. So to answer the question, we do not buy every stock on the
consider buy list, just the ones that are hitting the buy points in
sectors that aren't getting hurt on the day.
stock as it crosses the buy point but it reverses down, do I hold it or
sell it right away?" Great question, and here is what we do. We buy pretty
heavy on a breakout, so if the breakout fails and the stock gets smacked
down, we stand to lose a significant amount of cash. But if we sell back
out as the stock falls down to where we bought it what are we out? A measly
40 dollar trade charge right? So we may buy a crossover (where the stock
crosses our buy target) then get shook right back out, buy it again later
as it crosses, and get shook right back out again. All it cost us was 80
dollars for trying, or if we were slow and couldn't get out exactly where we
got in, maybe $100-150.
prove if a breakout is real is to let the stock close above the breakout
buy point for a day. That is generally safer, but of course you miss the
initial move whatever that may be. The point is this, if a stock is moving
up, crosses a breakout/buy point, and instantly gets pushed back down,
lick your wounds, sell the darned thing and wait for the next attempt.
Don't hang on to it because it may get pushed down several dollars on a
failed breakout attempt and we don't want you hanging on to something
"hoping' it will come back, sometimes they don't!
attractive buy in several sectors so that if a sector gets hot, you
probably have a good stock to play in that sector. If we have a "consider
buying" on the XYZ company and the next day XYZ is weak, don't buy it,
something isn't right. Likewise if you do buy XYZ as it crosses our buy
area, if it reverses, get back out quickly. Sometimes there is no telling
why the market does what it does, but if your stock can't get through and
hold the buy area, it's better to be safe than sorry!
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