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Strategies & Market Trends : Point and Figure Charting

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To: iGregor who wrote (5298)	8/3/1998 10:34:00 AM
From: james ball	Read Replies (3) of 34811

Ok, lets talk for a moment about the action of sectors when the defensive team is on the field. It is very tempting to jump on sectors that move below 30% and then reverse up. Always keep your eye on the main coach. For traders its ok to take short term positions on sectors that rotate below 30% but you must keep a short term posture. What that means is to follow the position up with stops. Initiate a stop when the position is put on and if you are lucky and the position bucks the trend and does rise, raise your stop to entry point immidiately. Continue to follow the stock up with stops and if you are taken out simply go back to the sidelines and reevaluate the position. If during the short term trade the NYSE Bullish Percent reverses up then take the stops off and play it for the longer haul. Once you are stopped out never look back. Only look forward. Never tell anyone what positions you have because at some point you will be forced to justify the position and you might have already sold. When using puts as insurance. Be sure the buy the put that most resembles your portfolio. Hold that put insurance unitl expiration and hope it expires worthless. By holding until expiration you take the trading mentality out of the insurance business. If put insurance is expensive a trade off is to create a put bear spread by selling a lower strike price against the long put and this will cut your costs. It will also cap off any further gain below the lower strike price that was sold. In most cases the spread will be enough. Remember it will take two and probably four commissions to do this so it must be factored in. One more thing. In 1989 the Bullish Percent was in the low 40's before the broad market finally lost ground. It also took from Oct. 1989 to Sept. 1990 before the broad averages took a major hit. The current market seems to be taking the same tack. When explaining about the imbalance between supply and demand remember there is always a buyer and a seller in each transaction. IT is the unwilling seller or unwilling buyer that causes the price changes ie. The specialist who must make the market orderly that is forced to sell from his invantory to cover the demand. He raises the price of the stock as he sells. Therefore it is when more sellers than BUYERS WILLING TO BUY that cause price changes. Someone on the radio recently had it all wrong. Tom

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