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.

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Related Posts From the Past:

• Sunday Night Market Insight, March 09 2008
• Blain’s Nightly Stock Picks, March 17 2008
• Thursday Night Market Insight, March 7 2008
• Weekly Market Commentary, March 11th 2008
• First Solar Roll Over Explained

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?

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Pingback by Sunday Night Market Insight, March 09 2008 | Stock Trading To Go

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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