Interesting discussion in class today that relates to your question... sorry dont have time to clean it up but it is worth reading through.
Hope you find it interesting
Good Luck
ken
www.mtrader.com
MTrader Class - 10/12/98 (C) Copyright 1998 The Momentum Trader
[12:30] <KenWolff> 9:32:08 today we had a runner market..
[12:31] <KenWolff> 9:32:17 why do I say that???
[12:31] <KenWolff> 9:32:48 hint: best momentum is with what type of
stocks..
[12:31] <KenWolff> 9:33:10 first day gainers with news..
[12:32] <KenWolff> 9:33:21 RNWK and NVLS..
[12:32] <KenWolff> 9:33:37 I normally assess the market by the best
stocks...
[12:32] <KenWolff> 9:33:51 I will first assess the selling pressure that I
expect...
[12:32] <KenWolff> 9:34:05 then next will be the buying pressure as I
attempt to nail the bottoms..
[12:33] <KenWolff> 9:34:40 RNWK and NVLS had no pullbacks off the gap up
pointing to strong buying on the day.. "runner market"
[12:33] <KenWolff> 9:34:50 a runner market is the strongest you will
see...
[12:34] <KenWolff> 9:35:30 sometimes you will not see anyselling all day
long which is the easiest market to trade because any stops will not be a
problem if you allow them to get blown...
[12:34] <KenWolff> 9:35:41 you simply wait and you eventually make
money...
[12:34] <KenWolff> 9:36:00 BUT 'THAT TYPE OF TRADING WILL EVENTUALLY MAKE
YOU A LOSER'
[12:35] <KenWolff> 9:36:19 But you will see many daytraders making money
today...and generally be happy...
[12:35] <KenWolff> 9:37:01 Now the only time I will attempt to short a
running market is when the market move is coming off extreme nervousness...
[12:36] <KenWolff> 9:37:41 usually I will limit my shorting and only
consider big percentage climbs (at least a price climb over the previous
closing price by 20%) such as RNWK and NVLS
[12:37] <_kelvin> hello ken
[12:37] <KenWolff> 9:38:40 I have given an example of trades being like
the value of a Mercedes ....
[12:37] <KenWolff> 9:38:43 Hi Kelvin..
[12:37] <KenWolff> 9:39:06 That is of course an oversimplification..
[12:38] <KenWolff> 9:39:28 I would like to introduce a bit more to our
value example...
[12:38] <KenWolff> 9:39:42 1. Stocks are actually like many makes of
automobiles...
[12:38] <KenWolff> 9:39:51 they each have their own value base...
[12:38] <_kelvin> i'm a trial member, and i did a paper trade on the gainer
candidates, NVLS was really good, but i'm learning, i'm just a beginner
[12:39] <KenWolff> 9:40:13 and it is according to sector, price, basic
value, etc..
[12:39] <KenWolff> 9:40:37 Please wait for discussion Kelvin...
[12:39] <KenWolff> 9:40:49 I usually comment and give a class at this
time... questions later...
[12:39] <KenWolff> 9:40:57 OK... sector:
[12:40] <KenWolff> 9:41:29 sector will be determined much like the value
placed on the manufacturer of the automobile..
[12:41] <KenWolff> 9:42:15 You have, Internets, Utilities, Banking,Chip
makers, Computer box makers, Auto, etc..
[12:41] <KenWolff> 9:42:30 each sector adds or subtracts value..
[12:41] <KenWolff> 9:42:44 and also more important... "MOMENTUM"
[12:41] <KenWolff> 9:42:53 For example:
[12:43] <KenWolff> 9:44:16 If you could have any car you wanted to re
sell... what car would you pick.. sport utility made by Mercedes, or an
explorer by Ford..
[12:43] <KenWolff> 9:44:44 One would be hotter than the other...
[12:43] <KenWolff> 9:45:02 and also a pickup truck would be different than
a BMW..
[12:44] <KenWolff> 9:45:17 each sector has its own momentum ...
[12:44] <KenWolff> 9:45:36 for example many of my trades today were taken
from the Internet sector...
[12:44] <KenWolff> 9:45:40 they are hot..
[12:44] <KenWolff> 9:46:01 So if I want the most potential in a Hot
market.. I want a Hot trade... ...
[12:45] <KenWolff> 9:46:11 It is like a piggy back effect..
[12:45] <KenWolff> 9:46:22 the strong market will propel the strong
trade..
[12:45] <KenWolff> 9:46:57 so we go shopping for the hot stocks.. first of
all "FRESH NEWS" ... RNWK,NVLS ..
[12:46] <KenWolff> 9:47:18 and even BAANF... even though the news is
negative... the market will still reward what????
[12:46] <KenWolff> 9:47:25 VALUE!!!!!!
[12:46] <KenWolff> 9:47:52 Each sector, stock and market has its own
individual VALUE!!!!!
[12:46] <KenWolff> 9:48:08 and we depend on "perceived value" not real...
[12:47] <KenWolff> 9:48:39 and each trade is simply a matter of :
[12:47] <KenWolff> 9:48:43 1. reading the market..
[12:47] <KenWolff> 9:48:51 2. reading the sector
[12:47] <KenWolff> 9:48:56 3. reading the trade..
[12:48] <KenWolff> 9:49:30 In a market like today... all you have to do is
get off your butt and buy...
[12:48] <KenWolff> 9:50:02 sorry.. I am oversimplifying again..
[12:49] <KenWolff> 9:50:18 Just a second gang..
[12:49] <KenWolff> 9:50:33 I am interested in buying RNWK off 34 1/2
[12:50] <KenWolff> 9:51:54 Just a sec class... sorry...
[12:50] <KenWolff> 9:52:00 Lets have some questions...
[12:51] <Nesi> k
[12:51] <Nesi> <runner> KEN would talk about investing long term money &
how to get in & out ?
[12:52] <KenWolff> 9:54:06 When I say long term money I normally do the
following..
[12:53] <KenWolff> 9:54:17 I will enter a few stocks that have the best
momentum..
[12:53] <KenWolff> 9:54:35 on thursday when DELL was at 40 1/2 I said GO
LONG ..
[12:53] <KenWolff> 9:54:55 I would have bought
WCOM,XCIT,YHOO,AMZN,XCIT,DELL,LCOS ..
[12:53] <KenWolff> 9:55:05 as these were under heavy price swings and
accumulation..
[12:54] <KenWolff> 9:55:19 Now... how I play them is two ways...
[12:54] <KenWolff> 9:55:32 I play them for several days... I consider TWO
methods for exiting..
[12:54] <KenWolff> 9:55:51 1. I will begin to take my profits above 20%
price increase...
[12:54] <KenWolff> 9:56:01 and I consider exiting all trades..
[12:55] <KenWolff> 9:56:19 I think someone made 50% as they said earlier
today and sold..
[12:55] <KenWolff> 9:56:26 at 50% you ALWAYS EXIT..!!!
[12:55] <KenWolff> 9:56:49 Why??? Because the percentage climb in a few
days will create selling pressure and why risk it???
[12:56] <KenWolff> 9:57:21 2. I will consider exiting my trades on the
first day they end nearer the lower end of the days price range...
[12:56] <KenWolff> 9:57:46 the latter method will hold more risk but you
can really make more money potentially...
[12:57] <KenWolff> 9:58:17 with the gap up and the narrow ranges today.. I
would exit long term positions..
[12:58] <Janine> NVLS dumping at 28 7/8
[12:58] <KenWolff> 9:59:31 You must consider the percentage of this market
falling again... and we are only riding a short term reversal.. remember on
Thursday I said this nasdaq slaughter would end and even in a bear market
would correct to the upside..
[12:58] <KenWolff> 9:59:50 We could still be in a bear market!!!!!
[12:58] <KenWolff> 9:59:53 No one knows..
[12:58] <KenWolff> 10:00:06 good luck NVLS shorters..
[12:59] <KenWolff> 10:00:14 OK. .. next question??
[12:59] <Nesi> <dodgedart> When you said "Short BAANF at 13 7/8, does that
mean short when the bid hits 13 7/8 or the ask hits 13 7/8?
[12:59] <runner> Thx KEN how about stops on long term money ?
[13:00] <KenWolff> 10:01:25 that is my price target... you can adjust if
you wish... Usually I mean 14 would be very unlikely and if you see a pause
with some weakness at 13 3/4 x 7/8 you can go short at 13 3/4 but I still
consider the stop loss to be 14...
[13:00] <KenWolff> 10:01:42 Long term money stops are always set at about
6%...
[13:00] <KenWolff> 10:02:07 I happened to nail the bottom of nasdaq dead
on...so 1% could have been used...
[13:01] <KenWolff> 10:02:15 but normally 6% to 8% ...
[13:01] <KenWolff> 10:02:32 Next question??
[13:01] <Nesi> <golden> Ken-why would a stock with bad news and at a record
low,like BAANF gap up?
[13:01] <KenWolff> 10:03:04 because of "perceived value" golden....
[13:02] <KenWolff> 10:03:24 In every market you will have Value traders
called contrarians...
[13:02] <KenWolff> 10:03:43 they always go against the trend....trying to
enter and exit before the crowd..
[13:02] <KenWolff> 10:04:07 and over the years they have made me thousands
of dollars...
[13:03] <KenWolff> 10:04:49 they are sometimes very predictable as a group
and if you learn to ride trades with them you will indeed be rewarded...
[13:03] <golden> Ken-any way to spot this kind of stock before the market
opens?
[13:03] <KenWolff> 10:05:03 BAANF has a perceived value off the first two
bottoms..
[13:04] <KenWolff> 10:05:18 We buy bottom number one, two and five...
[13:04] <KenWolff> 10:05:41 because doing those three buys is well worth
the effort in stop losses...
[13:04] <KenWolff> 10:05:49 same consideration you have with any trade...
[13:04] <KenWolff> 10:06:05 a position in any trade MUST BE WORTH THE STOP
LOSS OR LOSSES..
[13:05] <KenWolff> 10:06:55 Yes golden... you simple find a good news
reader or a scanner...
[13:05] <KenWolff> 10:06:58 we have both...
[13:05] <golden> Thanks Ken
[13:05] <KenWolff> 10:07:10 simple=simnply
[13:06] <KenWolff> 10:07:23 simple=simnply=simply
[13:06] <KenWolff> 10:07:25 LOL..
[13:06] <KenWolff> 10:07:37 next question??
[13:06] <Nesi> <Thomas> Ken, what is the most important quality to look for
in a stock when selecting end of day for next morning gappers?
[13:06] <KenWolff> 10:07:57 the last 5 minutes of trading!!!!! |
