Tuesday, March 9, 2010

Who won today - bulls or bears?

The resilience of this market in face of overbought condition continues to amaze me. But just as I decided to give yesterday to the bulls in spite of a red finish to the bulls, I have to give today to the bears in spite of the green finish. The market behaved strongly for most of the day before falling late in the day for pretty much no real reason. I think this is something we are going to see more and more of in the near future as more and more people will start taking profits as we approach 52 week highs. So, guard your profits zealously in this volatile environment - and that's exactly what I did wrong today.

I had a pretty good feel of the markets today while I was able to follow them, which makes today all the more disappointing. I watched gold bounce off the MA(50) and oil also recover from a poor start in the pre market session, which made me bullish heading into the day. I also saw a lot of positive action in the airline stocks and posted about all this movement on the twitter. I decided to close my DUG position at 12.27 for pretty much breakeven. Got into UAUA at 18.25 on a breakout, which turned out to be a good decision as it made repeated attempts to cross 19. So far, so good.

I also got into PAL at 4.26, seeing the metals make a recovery. I didn't like the price and volume action in this one and got out at 4.29. Within five minutes of my selling, the volume came in and it went up making a high of 4.40. This is the second time this stock has done this to me within a week. Usually, I am able to predict the price/volume action pretty well by looking at the tape, but this is the second time volume appeared out of nowhere in this stock, or at least I wasn't able to see it coming. I took a position in LCC at 7.71 seeing the continued strength in airline stocks.

I didn't have time to watch the markets after that but when I did in the afternoon, UAUA was consolidating in 18.90s and LCC was at around 7.89. Not bad, eh? That's where things took an unexpected turn. The next time I looked UAUA was in 18.50s and LCC was also down in 7.70s. I got out of UAUA for a small gain at 18.41, leaving what was once a very decent gain on the table. What  did I do wrong?

Simple. I let my first trade - PAL - affect the rest of my trades - UAUA and LCC. Seeing that I had got out of PAL too early, I subconsciously decided to give the other two stocks a lot of room to run, something which is against my trading style. If I can learn not to do this from today's trading and try to improve on it, I would consider today to be a successful day with a small price paid for a valuable lesson. I got into SDS at around 32.82 close to the end of the day and am also still in LCC.

That's it from me for today. It was a second straight day of consolidation for the bulls, not a bad thing at all, but I did not like the close of the day and will try to be even more cautious in taking long positions and holding on to any profits.

Take care and good luck!

P.S.: Wouldn't it be just like the Stock Gods to bestow a pullback upon us right on the very first anniversary of the bull market? :)

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