Is it time to Sell, Buy or Hold?
Friday, March 16, 2007 | Teeka TiwariRating:
OMG, I need to sell! OMG, I need to buy! If these simple sentences describe your buying and selling process, we need to talk. One of the hardest things I’ve had to learn is to manage my emotions. Emotional decision-making is disastrous whether in everyday life, love or investing.The volatility in this market will do all it can to play with your emotions. On some days, you will be gripped with the certainty that the bottom is in, and NOW is the time to buy. On other days, you will be thoroughly convinced that the opposite of that is true.
Here’s a tip: if you feel you “have” to do something, you are better off doing nothing. Because the decision to do nothing is still an investment decision. A dollar not lost is a dollar earned! Remember, we make money in the market by investing and by knowing when not to invest. Avoiding losses may not be as tangible a win as making money, but it’s just as important.
We saw the market on Wednesday stage a very impressive late-day comeback. Now, this is usually quite a good sign. However, if we look past the action in the indexes we can see that more stocks actually posted sell signals than buy signals! This is a very, very bearish divergence and a clear indicator of more pain to come.
The play here still remains selling into strength. For those of you who use PUT options to play the downside, the best days to initiate those trades are going to be on up days, not down days. You want to use the market volatility to your benefit. Many groups have become quite oversold. A quick perusal of the MACD’s fast and slow stochastics will show that some stocks are three standard deviations oversold, never a good time to short something. So a sharp counter trend rally is to be expected in some of these sectors.
These sharp rallies set up incredible entry prices for those looking to put on short positions. Look for this type of counter trend rally to hit the brokers. After almost three weeks of constant selling, the group looks like it now wants to stretch its legs a little bit to the upside. Assuming all things remain equal in the market (i.e. no reversal in trends, etc…) this action will set up a fresh round of highly lucrative shorting opportunities.
Remember. Let the game come to you!
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Teeka Tiwari
Chief Investment Officer
ETF Master Trader
