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.
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?