The market was weak and a bit of selling tipped the scale | stockbee

7/17/2014

The market was weak and a bit of selling tipped the scale

Breath trends were deteriorating for last 8 to 10 days , so the Malaysian Airline shooting was not necessarily the reason for the selling today. The market was weak and a bit of selling tipped the scale.

Breadth trends deteriorated further as you can see in the Market Monitor . 176 stocks were down 4% on high volume. The breadth indicators like number of stocks up 25% in a month and number of stocks up 13% in 34 days are in negative territory. That shows the damage from last few days of cumulative selling. If you are up 5 times the YTD S&P gains like I am my objective is to build on it and not give up a penny . Coming in to today I was positioned for weakness.

The objective of swing trading or position trading is to make money and keep it and add to it. It is not to make money and give up lot of it during corrections. To do that you need to do proactive risk management. You have to be slightly ahead of the curve and become defensive at first hint of likely trouble. Breadth gives you ample warning ahead of time, if you acted on that you would keep your profits.

Corrections in this market so far have been shallow, so we will see how far this goes. At some stage the market will again setup on the long side and there will be ton of opportunities. In the meanwhile extremely selective approach on both long and short is what my focus is.

If you want to survive and prosper in this game you have to do extremely good job of risk management. 

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