Thursday, March 29, 2012

Taking a Shot or Giving Something a Chance

Mega Millions is going to be over $500 Million dollars Friday night. If you don't hear from me by Monday, you know what happened.

Taking a Shot or Giving Something a Chance
It's been quite a different week for 2012 as volatility and market drops have come back into the mix. In the summer of 2011 a 1% SPX drop would be a great "relief rally", in early 2012 it's a bit more scary.

My focus in 2012 has been on individual names and trading longer term swings because I have stepped back a bit from active involvement in markets to work on other things. Like my fat stomach area. Is the market topping here? Will it be sell in almost May and run away? Are we going back to the environment where all you can do is take quick pop shots at the market and run away with any gain you can grab? Maybe. I don't think that is clear right now.

And until that type of situation has arrived I am focused on giving something a chance instead of taking a shot.

What I mean is best shown by a daily and weekly chart of a current long, MBFI. In January I started to get excited by what I saw in regional banks and savings and loan firms price and volume wise (with my man @swooon). In my trading account I was waiting for some things to firm up and by early February and March I was positive on the sector and several names. The daily for MBFI (click on any chart for larger view):
I was not long for the big pop over about $21 but if I had been it would have been a spot to take profits and move on (bought on 3/20/2012). But maybe there is something more going on here. The accumulation has been strong through out uptrend and sell offs have been on depressed volume. As of today the price reacted well to the 20 MDA and has survived a market sell off while remaining above the breakout area of $21. I am down on the position (about 2%) and could cut and run here.

I selected this stock based upon a weekly chart and here it is:
I don't want to talk charts all night and point out little minutia. It's marked up on chart enough.

My point here is that I am giving this (and several others set up like it) a shot here to come to terms with some price levels that could mean substantial upside if held. If the market correction gains steam and a more serious pull back is at hand, I will take the loss (or break even on others) and move on. What I am not going to do is freak out and run away from stocks that have not broken the patterns that I selected them for out of fear or panic.

Complacency has many forms. Clearly the "buy the dip" one is easy but another related one, and one I see more often, is the "sell the dip" on an uptrend. Dropping a well structured position that has not violated any real price points or patterns is easy in an uptrend because you are still up and in the money. Seeing a position through to a logical end, be it price target to upside met (Nice!) or a failure at a key level (Sucks, and your stop), is how I treat longer term trades.

Have a good night.


The Basis Point said...

Just bought into the office pool for MegaMillions!!

Gtotoy said...


EconomicDisconnect said...

Gtotoy, timing gears rule, even with the whine.

GawainsGhost said...


GawainsGhost said...

I'm back! I was having a problem posting comments for the last couple of days, but now it all seems sorted out.

To wit, hey GYC, this should be really up your alley.

Now, if that doesn't scare you, nothing will.