Wednesday, September 15, 2010

Mostly in cash

Another day of consolidation in the markets which is just what the doctor ordered for the bulls as the market quietly works off overbought conditions. It seems like sooner rather than later the bulls are going to take a crack at top of the multi-month trading range that the markets find themselves in i.e. 1130 on S&P and 2325 on Nasdaq.

Personally speaking, I decided to go heavily in cash today selling WBC for 1.3% gain, ARUN for 2% gain and getting stopped out of SOLF for 2.07% loss. Why sell these stocks when they are still doing well and I am still leaning bullish? Well dear readers, as we know the markets are at the crossroads. It could be another failure for the bulls at the top of the trading range, a range whose bottom is at 1040 or a break of the above resistance level which will be very significant indeed. My trading account is up around 12% since the markets have bounced off 1040 levels, thanks to being long on margin most of the time and I am not willing to put these profits at risk here with the market still making its mind where to go. And I am ready to jump in if the market breaks 1130, so if the markets do continue going up, all I miss out on is a 5 point move on the S&P. Now, that I can live with. 

Trading is basically all about managing the maximizing the reward/risk ratio. Obviously, one can do this by increasing the reward or reducing the risk and I choose to do so by doing the latter, though there is nothing wrong in maximizing the ratio by doing the former. It just depends on one's trading style, which ideally speaking, should be an extension of one's personality. What's the point of making lots of money if you are nervous or anxious the entire time?

Anyway, the levels to watch out for tomorrow on S&P are 1130 on the upside and 1115 on the downside. Until 1115 breaks, I will continue to remain bullish on stocks.

Take care and good luck!


Anonymous said...

you mean 1130 on the upside?

positiontrader said...

Corrected. Thanks for pointing that out!