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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: raymond marcotte who wrote (6515)	3/2/1998 11:11:00 AM
From: Robert Graham	Read Replies (2) \| Respond to of 42787

There are two approaches that I see to short term trades. One is to go for a small profit that is to be made in a short duration of time. In my opinion, this approach lends itself to the trading options due to their limited time element. This also is how many play the market as a short term trader. Another is to follow the momentum up of the stock. This can be for one week, one month, or even several months. As soon as there is evidence of weakening momentum, sell the stock. This is particularly important for the stocks that are played by the "momentum players" where this type of player is there specifically for the strong momentum of the stock. Once the group begins to leave the stock, the stock drops through the floor. Keep in mind that price momentum is related to but different than the trend of the stock. Relative strength is an important factor here in seeing how the stock behaves in relation to the market. Oddly enough, I have found the indicators that were designed to specifically measure "momentum" are inadequate. I get a better idea of price momentum by following the tape and also reading momentum indirectly through other indicators like StochRSI and MACDs. This is why I also can see Judy's indirect but very useful technique in measuring momentum through the convergence MAs would work. Following price momentum has allowed me to get out of a stock before evidence developed of a trend break that lead to a downtrend. For instance, I was out of WMT before its successive unsuccessful attempts at breaking through 40. However, I knew WMT had not seen the end of its price gains. Now WMT has broken through 40 and last I saw was at about 45. I just have never used it specifically to enter a stock in the early stages of its growing price momentum like Judy does. Very interesting indeed! So in answer to your question, if I was following stock up in the form of a position in the stock itself, I would rely on the presence of price momentum to tell me when to exit which may place me in the stock for months, or this may end up having me exit the stock in much less time. Since I trade options, I am out in a much shorter duration of time. I can always move back into the stock. Actually my approach tends to be both time and price momentum oriented. When I encounter any signs that the short term momentum is fading I exit the stock. I tend to look at momentum in terms of the day to day and at times hour by hour price action of the stock. This gets me out of the stock in a shorter time frame. Also if I enter a stock that does not perform as I expect it to in less than one week, I am out looking for another opportunity. Bob Graham