From Briefing.com...(DAYTRADER): Many novice traders seeing for the first time the type of carnage created by the conclusion of a momentum rally. But since these are also the individuals who are most likely to marry a momentum play, many are still holding onto profits following the extraordinary multiple day moves made by these stocks. The traders who are truly writhing in pain are those who bought at the open yesterday and are still holding onto those positions. For example, Net.B@nk (NTBK 151 3/8 -20 5/8) currently trading down almost 100 points from yesterday's intraday high of $249. Recent highflyer Florida Banks (FLBK 13 1/2 -3 1/2) has tumbled 29 1/2 points or 69% from yesterday's intraday high. Of course, Briefing.com is sure that our readers have made it through this correction unscathed following our warning in Tuesday's "Daytrader" column that this type of broad-based participation has in the past signaled a near-term top in the Internet stocks. Of course, there are positives to the type of capitulation seen over the past two sessions. First, a great deal of overhead supply is being taken out of the market. (The sooner profits are taken, the sooner the next big momentum rally will start). Second, the downturn will hopefully reduce the number of "junk" IPOs flooding the market, as well as cap the recent surge in secondary offerings... As discussed earlier this week, now is the time that traders focus on holding onto profits made over the past several weeks. This is done by implementing more stringent loss management controls and pulling back on the rapid-fire trading, that in a down-trending market is equivalent to account churning. Traders should remember that when the momentum turns negative, the odds shift shift back to the house, or in this case the market makers. Spreads widen, traders are sucked into stocks by fake moves and news that once was used as an excuse to rally, is perceived negatively. Day trading is often a boom to bust venture. But it doesn't have to be if one is disciplined.
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