This Falling Dagger Can Bleed Your Portfolio
Tuesday, June 17, 2008 | Chris RoweRating:
The problem with individual investors' outlook on the market is that they TYPICALLY (not all of them) want instant gratification.If they buy XYZ because they think it will go from $5.00 to $20.00 over 2 or 3 years, but the stock first visits $3.00 within the first few months, they look at it as a loser. Then they let the stock's action dictate their future investment decisions.
Look at the financial stocks right now. People have been telling me I'm wrong about the Financial sector's bear market since May of 2007. On every rally they say I'm wrong, and on every drop they say the opposite. The key is to not confuse the time frame of the trend.
These things are in a long-term down trend and people keep getting sucked in every time they rally higher.
There are always short-term rallies in the long-term downtrend. Don't be fooled. Don't try to catch the falling dagger. It's not worth it.
Instead, when they gain lots of strength, and people are saying "the worst may be behind us," take bearish positions on them. Find out how by clicking here.
Yesterday Lehman Brothers announced in line earnings, causing the Wall Street sector to rally. "Maybe the bleeding is done this time." Yeah. About that ...
While Lehman's earnings were in line, they were in line with the earnings that they lowered guidance on just last week in an announcement that sent the stock 13.6% lower that day. These brokerage firms still have very little visibility. Many of these firms' stocks just violated major support levels. They are now rallying higher.
What you want to do is take the bearish positions when they reach the old support levels. If Lehman (LEH) trades near $40.00 again, that would be a good time to take a bearish position on it. I can't give you any more than that. If you are a Trend Rider member, don't sweat it, I'll give you the alert when the time is right.
But no matter who you are, do NOT, I repeat DO NOT get bullish on these things.
You will think I'm wrong in the short-term. I can almost promise you that. And when you take the bearish position, you will probably want instant gratification. You will think I'm wrong because your position may go against you for a few weeks, or maybe even a couple of months.
This financial blood bath isn't over yet, folks. These firms clearly have no visibility. Like Lehman, they are warning at the last minute before earnings are announced.
If you want to play the bull side, there is a sweet spot coming. It's a play on stock market seasonality that starts in late June. I wrote an article about it last year so you should read it today (by clicking here) and maybe the seasonal forces will help you profit this year (just like it did last year).
Anyway, I'll see ya next week.
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“Profit from the Trend”
Chris Rowe
Chief Investment Officer
The Trend Rider
