The right play is to sell at the highs. Sure, we all know that.
However, there is incredible pressure to sell at the lows. Sure, we all know that too. But do we?
I probably have 50 fifty ways to remind myself 'there will be incredible pressure to sell at the lows.' However, when day trading, I can't tell you how many times I've capitulated at the lows.
In fact, were I trading CSCO, I might have capitulated last week. And I would have at least 50 reasons to back it up. (If I were trading RIMM, there is no doubt in my mind I would have dumped 'that POS' on Friday.)
I'm too tired this evening to speculate on reasons why. However, I'm pretty sure buy-and-hold will end up saving me from selling at the lows, many times over.
ADDENDUM:
(a) The stock market is a sales game. They sell stocks to investors at the highs. As soon as you drive the stock off the lot, it depreciates. After a few years of watching the stock price tick down, you can't wait to trade it in. They don't need to steal it from you. No, you beg them to take it off your hands at the lows.
(b) Human nature and the 80/20 rule. 80% of investors get taken by the 20% able/willing to learn the discipline of buy low-sell high. It's not easy. Heck, a healthy diet isn't easy. Exercise isn't easy. Only 20% of people get it right.
(c) Thanks to t3d for posting a reference to Charles Ellis' Winning the Loser's Game. I have not yet read the book- but I've read a few reviews that give me the gist. Investing is not about becoming a 'pro' and beating the competition (there are no pros, bro). No, it's about learning not to lose. The name of the game: Don't lose money. How? Get out of your own way. There are 1001 ways to lose money in the market, all of them based on the premise that you can beat the market! The truth? As Morrison might say: You cannot beat the market! If you stick to the basics, and learn to avoid the mistakes that invariably cause you to lose money, you win.
Happy Fathers Day to all the Dads!
ReplyDeleteStill 67% long, or so.
Thanks for the post 2nd. After the past two months is sure "feels" like selling is the right thing to do so, which is actually the exact WRONG thing to do.
See ADDENDUM to the lead post. Solitary is giving me the kind of time/(solitude) I need to reflect on my sins. I'm planning to come out of here a changed man.
ReplyDeleteHow many good ideas do we need in order make money? 1-2? That might do it.
ReplyDeleteLook, the SPX will likely hit 2800 'more or less' around Birinyi's time frame. That is to say, a lot earlier than people think.
ReplyDeleteCouple that with the observation that the bulk of stock market index moves are concentrated in a few days each year, and you need to be in buy-and-hold. You want to be there when the black swans arrive for bears.
2nd - Birinyi's time frame? Just what is it and what is his reasoning? The only way I can see it is after the great inflation takes hold and stocks follow. Not in next year or two.
ReplyDeleteGreat post, 2nd_ave! I'll forward some friends here to read your post for educational purposes!
ReplyDelete2nd - 2 books I've been spending some time working through these days --
ReplyDeleteSelden - The Psychology of the Stock Market (1912)
http://ia600508.us.archive.org/15/items/psychologyofstoc00seldrich/psychologyofstoc00seldrich.pdf
Neill - Tape Reading & Market Tactics (1931)
http://site.fraserpublishing.com/TAREMAshort.pdf
(may not be the whole book)
2nd -- RIMM -- with all due respect, if u had been 'trading RIMM' then u would NOT have owned any at the open...
ReplyDelete(1) there was a gap down open @ 29.64
(2) the short covering bounce limited the initial decline to 29.35
(3) the real movement was one of Vad's DBI (Drop-Base-Implosion) structures
(4) The 'Base' (09:45-10:10) was from roughly (29.00-29.25)
(5) The 'Implosion' (29 -> 27.xx) was the play w/ the 29.35 level as the stop level
I'm understanding why Vad does what he does and why these over-night holds are not what to do. But it does require an 'instantaneous read capability' at the open and it's NOT EASY!!!
RIMM - Based upon my interpretation of this chart, there was no buy signal this month:
ReplyDeletehttp://stockcharts.com/c-sc/sc?s=rimm&p=D&yr=0&mn=7&dy=0&i=p99295968853&a=217994610&r=7736
Ditto for RSI(7).
cp -RIMM - short entries mostly BUT look at the (1d-1m)...there are sometimes these 11:30-noon slight climbs going into 14:30 (to suck in value investors?)before the EOD sweep-it-off-the-table move
ReplyDeleteKyle - Yes, I'm quite certain value investors were taken to the cleaners. That is, ones who were following their gut and not the chart. I'm not saying there weren't long opportunities on the 5 or even 15 minute charts, there probably were.
ReplyDeleteSo yeah, even though RIMM had already fallen off a cliff, the charts still presented opportunity for eager shorts.
cp - if I may ask, why did u start focusing so much on the MACD/ADX Pincher pattern???
ReplyDeleteDeveloping economy inflation - Assuming there are too many people chasing too few products, there could be inflation in developing economies. This demand, in turn, could create import inflation for developed countries relying on foreign made goods.
ReplyDeleteKyle - "why did u start focusing so much on the MACD/ADX Pincher pattern?"
ReplyDeleteThe MACD/ADX pincher is a bottoming pattern metric, and since we're no longer topping I thought it might make sense to focus on bottoming patterns.
We all want something that works, right?
Anyway, the MACD/ADX pincher is backtest-able, and I expect it may may complement the RSI strategy. Perhaps at some point I'll integrate the two.
cp - Here is a Stockcharts scan using MACD no ADX
ReplyDelete[type is stock] and [country is us] and [1 < close] and [close < 80] and [sma(3,volume) > 300000] and [max(5,high) - max(5,low) > 0.10] and
[[MACD Line (12,26,9) > -0.20 + MACD Signal (12,26,9)] or [MACD LINE (12,26,9) < 0.20 + MACD Signal (12,26,9)]]
Do u use stockcharts scans????
Kyle - No, I haven't used the stockchart scans yet.
ReplyDeletecp -- not meaning to work u over, but bsi87 had an interesting capitulation scan...
ReplyDelete[type is stock] and [country is us] and [1 < close] and [close < 80] and [sma(3,volume) > 300000] and [max(5,high) - max(5,low) > 0.10]
and [RSI (7) < 10]
CHOP,SID,NPTN,QKLS, RIMM, SPWRA,SPWRB, TTM, UTHR
TTM - I've been interested in that one.
ReplyDeletehttp://stockcharts.com/c-sc/sc?s=ttm&p=D&yr=0&mn=7&dy=0&i=p99295968853&a=217994610&r=7736
DO - I was looking at DO as well, it exhibits better MACD/ADX symmetry and RSI(7) has just cycled through 30:
http://stockcharts.com/c-sc/sc?s=do&p=D&yr=0&mn=7&dy=0&i=p99295968853&a=217994610&r=7736
cp -- here is an options short put scan that I like
ReplyDelete[type is stock] and [optionable is true] and [country is us] and [close > 5] and [close < 150]
and [sma(5,volume) > 700000] and [market cap > 1,000]
and [[max(65,high) - min(65,low)] > [0.22*min(65,low)]]
and [close < [[0.25*max(22,high)] + [0.75*min(22,low)]]]
and [RSI (14) > 28] and [RSI (14) < 35] and [today's RSI (14) > 2 days ago RSI (14)]
there r 35 ..AKAM, AAP...
cp -- if the volume restriction is increased then it comes down to
ReplyDeleteafl,akam,aci,arun,etfc,ebay,fcs,gps,hcbk,svu
I always liked fcs...
FCS - That's where many of the original ideas came from. ;)
ReplyDeletecp - I thought the original ideas came from Roswell, NM, but maybe I'm mistaken...
ReplyDeleteJeff Reeves lists good reasons (none of them lies) why 'the next leg up might be even bigger.'
ReplyDeletehttp://www.marketwatch.com/story/11-reasons-stocks-will-storm-back-soon-2011-06-16?link=home_carousel
"a bottoming pattern metric" - My subscription algo threw out a bottom spotter last Thursday at the low of SPX. Dow and NAZ did not generate bottom spotter signals but all three still have top spotter signals in place since May 2, which were very timely and effective for the ensuing downtrend. The SPX bottom spotter may be a heads up on an uptrend. I have no idea how these spotters are generated but they seem to carry some weight until they are invalidated by a crossing over.
ReplyDeleteKyle - "bsi87 had an interesting capitulation scan".... He used to post a result or two on BC and I followed once on WNR. Got my clock cleaned. It went from capit to kaput! He does not post on BC anymore but probably does on Twitter where I followed him for a while. I have a Twitter account but don't use it much now.
ReplyDeleteBTW, WNR in summer of '09 is a good example of why holding for the long term is good practice but there were many, many other examples.
I am in recovery mode this evening after Father's Day and the subset of that, Grandpa's Day. Two soccer games in some kind of tournament that one grandchild was involved in right here in Peoria, IL which included teams from Chicago (we lost). Three meals out including Sierra Pale Ale, Newcastle and Shiners Bock (excludes breakfast but if I would have gone to breakfast at the lunch place I could have had a can of Busch Bavarian for $1 as the Sunday Special).
ReplyDeleteKyle - Roswell - LOL, one might believe so only if accounts of earlier integration problems and hiccups weren't so unbelievably hilarious. These are unfortunately lost to history, but the issues encountered were certainly of human nature.
ReplyDelete"What we didn't realize then was that the integrated circuit would reduce the cost of electronic functions by a factor of a million to one, nothing had ever done that for anything before" - Jack Kilby
The Integrated Circuit
It seems that the integrated circuit was destined to be invented. Two separate inventors, unaware of each other's activities, invented almost identical integrated circuits or ICs at nearly the same time.
Jack Kilby, an engineer with a background in ceramic-based silk screen circuit boards and transistor-based hearing aids, started working for Texas Instruments in 1958. A year earlier, research engineer Robert Noyce had co-founded the Fairchild Semiconductor Corporation. From 1958 to 1959, both electrical engineers were working on an answer to the same dilemma: how to make more of less.
Why the Integrated Circuit Was Needed
In designing a complex electronic machine like a computer it was always necessary to increase the number of components involved in order to make technical advances. The monolithic (formed from a single crystal) integrated circuit placed the previously separated transistors, resistors, capacitors and all the connecting wiring onto a single crystal (or 'chip') made of semiconductor material. Kilby used germanium and Noyce used silicon for the semiconductor material.
Patents for the Integrated Circuit
In 1959 both parties applied for patents. Jack Kilby and Texas Instruments received U.S. patent #3,138,743 for miniaturized electronic circuits. Robert Noyce and the Fairchild Semiconductor Corporation received U.S. patent #2,981,877 for a silicon based integrated circuit. The two companies wisely decided to cross license their technologies after several years of legal battles, creating a global market now worth about $1 trillion a year.
Commercial Release
In 1961 the first commercially available integrated circuits came from the Fairchild Semiconductor Corporation. All computers then started to be made using chips instead of the individual transistors and their accompanying parts."
Roswell - Perhaps you're referring to one of USDA's federal research projects?
ReplyDeletehttp://sciencestage.com/v/2893/maryland-goatman.html
Stocks Cheapest in 26 Years as S&P 500 Falls
ReplyDeletehttp://www.bloomberg.com/news/2011-06-19/stocks-cheapest-in-two-decades-as-s-p-500-falls-with-earnings-climbing-18-.html
Sounds like a time to be buying, not selling...
303 gap fill for AAPL?
ReplyDeleteNBR guides a little lower. Let's see how BEXP/OAS/KOG/CLR/OXY/EOG play out.
ReplyDeleteNasty shake out in RES.
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteholy moly, I need new glasses or something, I think I misspelled every single word on my post which I just deleted.
ReplyDeletebuy limit order in at $22.75, this one has some room to run.
looking to go long CL shortly
KOG...It's nasty out there boyz.
ReplyDeleteWhich one Bro?
ReplyDeleteXLE/XLF cross.
ReplyDeleteI like BR, on the pull back to the PP....guess I should have included the stock symbol. Scratch new glasses, I need a brain transplant!
ReplyDeletelong CL 93.22
ReplyDeletewow, 1/2 off 93.33 stop to bs
ReplyDeletetrailers off 93.32, too crazy
ReplyDeleteBR- Wow, that chart is a mess. Looks just like TRX...No wonder you like it :)
ReplyDeleteBro - don't even mention TRX. I try not to even look at it....LOL
ReplyDeleteF - Is that a bottom?
ReplyDeletehttp://stockcharts.com/c-sc/sc?s=f&p=D&yr=0&mn=7&dy=0&i=p99295968853&a=217994610&r=7736
GPL - This sucker just loves to gap up from $3, this is the second time in a month...
ReplyDeleteSheesh!
CL - Looks just like an RB-style breakout play...
ReplyDeleteStinky on RBY @ 3.79 (S2).
ReplyDeleteGl players!
CP, Yes it is! Thanks for watching for me.See how the 50 day has held as resistance since April. Definite uptrend. Need it to come back toward the 50 for a good R/R ratio for a trade.
ReplyDeleteI also have to admit even though i have been the biggest hater of the stock. BBY looks good here. It put in a double bottom. I could see a 10% upside pretty quick.
Anyone else thinking this reverses lower yet again? My "leading indicator" stocks on my watchlist are red: AAPL, NFLX, OPEN, OIH
ReplyDeleteHRBN! Just like a penny arcade shooting match.
ReplyDeleteREMINDER russell rebalance FRIDAY JUNE 24th has the ability to push around some names leading into it and on it
ReplyDelete5/31 high of 1345.20 to 6/16 low , right at the 23.6 retracement 1278.63 after that we have the 38.2 @1291 (1292 was last weeks high)
http://twitter.com/#!/GrassoSteve
"Anyone else thinking this reverses lower yet again?"
ReplyDeleteWouldn't surprise me, the action now feels just like it did a minute ago and eerily similar to last week. The same algorithm still running?
JB - OPTT???
ReplyDeleteDRWI - Coming up for air?
ReplyDeleteDRWI - Tight pincher, perfectly symmetrical turning out of MACD and ADX indicate a buy signal:
ReplyDeletehttp://stockcharts.com/c-sc/sc?s=drwi&p=D&yr=0&mn=7&dy=0&i=p99295968853&a=217994610&r=7736
Volume came into the E mini at 9:30. Right a resistance now. I think we go higher.
ReplyDeleteLong OIH at $141.7
ReplyDelete$INDU - I think this looks like a good omen and it supports BB's assertion as far as I can tell, but I'm still a novice with this pattern:
ReplyDeletehttp://stockcharts.com/c-sc/sc?s=$indu&p=D&yr=0&mn=7&dy=0&i=p99295968853&a=217994610&r=7736
OIH is a great setup here technically. its right at the 200 DMA and I think it bounces to 147-148ish
ReplyDeleteCP - yes OPTT is on the list for sure, $4 something would be a fine entry
ReplyDeleteOIH - http://stockcharts.com/c-sc/sc?s=oih&p=D&yr=0&mn=7&dy=0&i=p99295968853&a=217994610&r=7736
ReplyDeleteNo confirmation yet, forthcoming?
JB - OPTT - Hmm, off the top of my head I wonder why not $2 instead???
ReplyDeleteIt's really hard for me to warm up to these money-hole stocks anymore...
OPTT - I do like the technology though, nothing's more beautiful than a low-tech solution to a high-tech problem and waves move all by themselves all day and night.
ReplyDelete"Oil falls to below $93 amid stronger US dollar- AP "
ReplyDeleteUmmmm, dollar looks flat to slightly down on my screen, certainly not up.
ECU.TO - Sure looks like David hit this one in a sweet spot...:
ReplyDeletehttp://stockcharts.com/c-sc/sc?s=ecu.to&p=D&yr=0&mn=7&dy=0&i=p99295968853&a=217994610&r=7736
CADC - Here's the chart again for grins and giggles:
ReplyDeletehttp://stockcharts.com/c-sc/sc?s=cadc&p=D&yr=0&mn=7&dy=0&i=p99295968853&a=217994610&r=7736
Note: These charts aren't static jpg's... so if you save the link they do at least refresh.
GPL - Sitting right on the double bottom neckline support ($3.24), if this level holds then $4.36 is the target.
ReplyDeleteTrying to find a spot to open a position in ANR. Any reason why not?
ReplyDeleteANR - Hell, I don't know, but here's the chart in case you want it:
ReplyDeletehttp://stockcharts.com/c-sc/sc?s=anr&p=D&yr=0&mn=7&dy=0&i=p99295968853&a=217994610&r=7736
COOL? It makes money and is growing???
ReplyDeleteCP- Got to be close.
ReplyDeleteEnergy seems like a no-brainer to me, I can't understand why everyone wants to sell... But what do I know?
ReplyDeletehttp://www.smartmoney.com/invest/stocks/5-moves-laszlo-birinyi-is-making-now-1307735653418/?link=SM_hp_featStory
ReplyDeleteLooks like Birinyi likes my OIH pick...I really like this entry for a $7 to $10 bounce.
In otherwords, I tend to agree. That and BEXP (watch the double bottom support neckline on BEXP for stop).
ReplyDeleteBEXP - I'd say that neckline support level is right at $25.50
ReplyDeleteAnd that's a guess, you know I suck at this.
ReplyDeleteANR - How do they plan on financing this?:
ReplyDelete6/1/11 "[$$] Alpha Completes $7.1 Billion Massey Acquisition at The Wall Street Journal"
BEXP - Still got that good 'ol one-dollar stride!
ReplyDeleteGold value index - Five new highs since early May. An ounce of gold at Friday's closing price buys...
ReplyDelete26.4% more barrels of oil than on April 8th (2011 GVI oil high)
28.1% more pounds of copper than on February 7th (2011 GVI copper high)
37.3% more ounces of silver than on April 25th (2011 GVI silver high)
High dollar price, high relative value - that's good for gold. Lower oil prices are good for miners.
http://2.bp.blogspot.com/-2I3polf5tPw/Tf7TRY9MWOI/AAAAAAAADiQ/1DEE3AUxN2Q/s1600/GVI%2B%252806-17-2011%2529%2B660W.jpg
My guess is we gap higher tomorrow in the markets. I think today's action was what was needed to get the bears scared. I still think we go to 1,300 to 1,310 and then probably drop
ReplyDelete1,340 isn't out of the question as well, though. I think the 1998-99 parallel is and has been playing out nicely.
ReplyDeletenew post
ReplyDelete