I agree with TraderXx, but I will still be looking for bargains but not in the ZOOX's or in the NTOP's. The point is don't look for bargains that are constantly breaking through the top of their trading channel over and over, but rather look for stocks that have just begun to bounce off support or are close to support. I did notice that traders were looking for what they thought were 'bargains' in some nets while the market was horribly tanking. How do you know the stock is done tanking?
What I was doing was looking frantically for the overbought stocks that still had upticks so I could short some more. Some I couldn't find any uptick so I bought puts (QCOM, YHOO).. There will be opportunities even in the net sector, but lets not go back to the 'blimpy' internets but wait for some of the beaten down to come back. What I expect is a little 'relief rally' in the super-blimps (like RHAT, CMRC, PHCM,NTOP etc) and they may go up 3 or 4 points only to come crashing down again later on.
This market is a professional shorters delight. They know they could get 20-30 points for those stocks and they wait for the opportunity to get them and watch them drop even further. Believe me I speak from experience. I had shorted HLIT twice for 5-10 points feeling quite smug only to watch HLIT drop another 20 points after a 'fakeout rally' in the stock. SNDK 'rallied' one day and luckily I got out after losing two, went short for 4 and now its down 17..Pauses in their downtrends don't mean they are recovering.
You are just seeing a bear flag that 'resembles' a recovery, but its just a pause before the continuation of the downtrend. I had to experience this to understand it. Luckily it was only potential profit I lost but I thought traders who are fairly new to this should know that just as there are 'relief rallies' and fake rallies for going long there is the same for going short.
Also don't short stocks that have already fallen quite a bit and will probably gap down tomorrow as well. For example should CMRC gap down another 5 or 6 points don't short it then, because it may get into 'recovery mode' that could cost you another 10 or 12 points. This short recovery may be shortlived but it could still lose you 10 or 20 points. I would actually short those if they recover tomorrow, but don't chase them if they continue down.
I would short the stocks that were not down today which is why I shorted PHCM while it was still up about 6 and tried but failed to get CMRC until it was already down 12 and actually that was not too good a move. I only shorted a few hundred because I figured:
a)I would keep that short for the next 3 weeks because the stock would most likely fall quite a bit by then
b) I get 5-6 points to grab in a gap down I'll take it and run depending on the mood of the market, then reshort after any 'dead cat bounce'
So don't 'buy' in the midst of dips (you don't know how long the dip will last) and don't short after the stock has already lost 15 points and it looks to you like you'll getting on board the titanic, and make money just before it sinks totally, because you won't.
I think that is why some shorters are so successful. They can actually short when a stock like PHCM is at its day high after two successive days of 20 points gain, while someone like myself waits until its only up 6 to 'make sure'.. but I learn from my errors and I could have waited for PHCM to be actually down before I shorted but I am now learning now to wait that long but to short right at the pinnacle. I had the right idea with CMRC this morning, but that stock was just too hard to pin down.
It sounds contradictory but it isn't, because some of you are proably like me and will start to panic if the stock you shorted starts to rise and you will tend to cover. So to prevent that
1) don't short a stock that has gone down too much in too short a time span. If you didn't get in at the beginning leave it alone.
2) Don't go long a stock that is still overbought but has a 7-12% drop until you are convinced the drop was not just a 'fakeout' bear flag and a definite trend reversal resulting from a 'real' breakout to the upside occurs, not just a little blip on the chart ( a pause) before there is a continuation of the downtrend. |
