When to hold overnight and when to sell?
You don't want to hold NSCP, RON, CMGI overnight, because they can give back gains the next day. You might want to hold stocks like OXHP, PSQL for 1-3 days or until the trend reverses. You don't want to hold stocks that trade on sentiment. We also rather have mid-caps than small caps and large caps. Some small caps will never really be as valuable as before, while large caps might become overvalued once again as DELL, MSFT and CSCO return to lofty valuations.. The mid-caps offer a happy medium. There are still mid-cap growth companies, whose intrinsic value is still high, have low debt, while at the same time they have been dragged down with the rest of the market.
Usually I exit 85-90% of my positions overnight when the market climate is extremely volatile. Some time last week (Thursday) the market was down even as the market ended up (Wednesday) on higher volume and momentum the night before. That was a false signal, a fake-out rally.
Last night the market had to do a complete about face coming from -174 to end up 37, with techs faring better than the increase would indicate. During such a scenario, I WOULD hold overnight and I have.
I don't get into more than 4-5 positions because inevitably in such a market 1/2 could be up while the other half down as most stocks were last week during selloffs.
As the market improves I will begin to hold positions longer and longer. As we watch the earnings plays unfold Sept/Oct/Nov and the earnings climate is clearer, sentiment will change and holding for longer periods will be okay. But since the climate has changed, intraday ranges of stocks have exploded and 5-10% gains.
And lastly, never be complacent. Never take the storm shutters down thinking the hurricane season is over, that is never start investing in too many "bargains" thinking stocks will rise from hereon in. Just look at some stocks today like RON, and some others already hit and watch them get hit yet again.
Don't forget many people held their portfolios throughout the sellof and would grab any opportunity to regain 13% or so and sell off when they've regained a decent profit. |
