Don’t Go Against The Trend

Lesson learned: If the charts tell you that the overall market is down and the short selling potentials are much higher than going long, just focus on shorting. Don’t go against the trend, you are just taking unnecessary risk if you do that.

As seen from the screenshot above, I go long on 2 stocks. I THOUGHT with bullish reversal signals, they will go up. However, I am going against the trend. True enough, the Dow go south again and my stop loss for my 2 long positions were hit. Luckily my losses were covered by my short position in Reynolds American.

Do take note that I am not investing. I am just trading these stocks. So I don’t give a hoot about fundamentals. I just find counters with the right candlesticks signals which can give me a high probable trade – in this case shorting them. I normally hold my positions for a few days only – swing trading.

Has the Bear Market Arrived?

STI 12 Aug 2011

(Click on image for bigger view)

If you look at the STI chart above, you will realized that during the past 10 years, the 50-day EMA (exponential moving average) only cut the 200-day EMA twice. This is very significant to me. It’s a confirmation that the bull market has turned into a bear market.

During the past week, STI plunged more than 10%. The 5o-day EMA has cut the 200-day EMA already.

However, I am still holding my shares. Why?

The 50 EMA is still above 200EMA for Dow Jones.

The market seems to rebound for the past 2 days. It might of course be a dead cat bounce. Unless the market can convincingly drop further the next few trading days, only will I sell my shares and head for the exit.

I will let the market tells me what to do. Having an exit plan firmly in my head helps me to be more rational and prevent panic selling.