Market Sheds 5% in Six Days, January Lows Tested

The week is finally over and the damage has now been done with the NASDAQ down a staggering 5.1% over the last six trading days. January lows have now officially been tested.

For the NASDAQ it was the break out of its wedge, and for the S&P 500 the ascending channel told no lies. Ever since last Friday, March 1st the market has simply taken a beating.

Some things I’ve been reminded of this week:

  • Don’t go long on stocks when the market is significantly selling off
  • Taking profits is not a bad idea, regardless of what hot industry you may be invested in
  • Stop losses save lives… and portfolios
  • Don’t trade will full positions when chaos is among us, only place bets with 50% allocation (If you are used to investing say $5,000 per trade only invest $2,500 per trade).
  • 3 out of 4 stocks follow the overall market trend
  • Shorting is really easy when 3 out of 4 stocks are going down anyway
  • Don’t buy speculative stocks when the market is free falling (DRYS anyone?)

It is times like this that discipline really makes all the difference. After conducting some simple math I realized I was knocked out of (via stop losses) over 5 positions this week, average loss roughly 3.5%. If I was to still be holding all of those positions still I would be down a staggering added 8%… on my WHOLE portfolio.

Because of discipline (and shorting) I can lick my wounds this weekend and hit the saddle again next week ready to roll. One thing is for sure though, I will be a lot more careful playing with fire.

See you on Sunday with more Nightly Insight.

-- Posted by Blain Reinkensmeyer on March 7, 2008 at 5:25 pm --

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Comments on "Market Sheds 5% in Six Days, January Lows Tested" are closed unless our forms appear below.
Comment by Jim
2008-03-08 15:06:00

I have a gold stock (Yamana Gold, ticker:AUY) that I am currently up about 25%+ on. I was considering taking profits off the table, but the market for gold remains strong. Do you have any technical insight to lend about this equity?

 
2008-03-09 16:16:14

[...] you didn’t read my post from Friday I would suggest doing so, it should help. This week the focus is all on being disciplined and [...]

 
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