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Strategies & Market Trends : Strong Industry Groups - Strong Stocks

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To: Sam Raven who started this subject	7/28/2002 9:37:53 AM
From: Sam Raven	of 1567

Planning your trade. "There is only one side to the stock market;...not the bull side or the bear side, but the right side. It took me longer to get that general principle fixed firmly in my mind than it did most of the more technical phases of the game of stock speculation." Jesse Livermore This begs the question....So what is the "right side?" The right side is to "plan" to make the most of the trend, whether on the bull or bear side, while keeping protective stops to defend against mistakes. While planning ask yourself..... 1) What is the market risk? Market risk is best determined by the market internals, either compare the number of stocks advancing/declining, new highs/lows or our screened stock ratio, which compares up trending/down trending stocks and their volume. Using either one of these will keep you in stocks capturing the best of the gain of the strongest stock groups. The market risk by most measures became high at the end of May. Paying attention to market risk will keep you on the right side of the trend. 2) What is the group strength? Regardless of the indices, there are groups of related stocks moving up or down. Market risk is reduced by holding stocks in groups that are strong or rising. Pick among different stocks in different strong groups. 3) What is the stop? What is the target? Set a protective stop as soon as a new position is confirmed. Plan to invest less than normal, or not at all, in down trending markets. Trading in a down trending market is a bet that either the market is going to get a temporary bounce, or that the stock is going counter to the market direction. Both are still high risk and also best traded with less than normal position size. Plan to know the stock groups. So you buy the strong groups and diversify into different groups. Plan to have an exit target by using stops. Plan to make more on the positions you are right about, than you lose on the positions that go down. Sam

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