Thursday, July 26, 2007

Excerpt from today's newsletter

Brutal sell-off in the market today but interestingly enough, there were some excellent opportunities; From the Forming List, on the long side we had CROX GRMN, and on the short side on HANS GES TSL CBEY. CRDN unfortunately didn't wait and was a mess through 74. Overall though, this is a tough market which is melting down to a much greater degree than most expected. Dip-buyers have been roasted for the most part in the last few days and there is full-fledged panic in the air.

Having said that, there was some good action on earnings/news on leader stocks such as AAPL BIDU RVBD CMI. In our own personal trading we are taking profits fast, especially on the long side (a bit too fast as we left almost a point in CROX on the table!) and if something goes against us, we get out a.s.a.p. A gap-down opening and some more panic selling could be a short-term capitulation move that could possibly last for at least a few days.

This market is ripe for a bounce, but that being said: Don't anticipate, don't think, don't analyze, don't try to predict. Have your set-ups ready from the night before, set your alerts, and when you see a base and break under the number, or at the number, and volume is heavy, pull the trigger with a stop under the base (and always always obey your stop). Other than that, just sit on the side-line and wait for your number. It's fun to talk about what the market might or might not do, but let it be just that, fun talk. That's it. Predict all you want, but when it comes to trading, leave all the predictions to the side, and just obey your set-ups. We had expected some sort of bounce coming in today (oh so so wrong), but with the exception of CROX, all our trades were on the dark side.

Sounds simple, but we guarantee you that if more traders would follow the advice of just following their set-ups from the night before instead of jumping from one emotional intraday scalp to another, there would be a drastic reduction in burn-out and blow-out rates.