Tuesday, December 20, 2011

Protect Your Capital And Profit.

Yesterday I went long when the index was plunging because I trusted my cycle analysis and my calculations. And today Santa came thundering down to vindicate me. But then I sold my long position one hour before the close, just like yesterday, only the other way round. My logic is simple and you can read them in my trading philosophy here ; http://bbfinance.blogspot.com/p/swing-trader-heaven.html

So I took the money and ran. Do I think that the rally is over? Heck no! There is more to come. But as of now, the index is over stretched beyond imagination. Like the elastic band, it has been pulled too far too soon and it has to come back to equilibrium before it can start its journey again. Today was a Major Accumulation Day. Yesterday was a Major Distribution Day. According to my good friend Cobra, we will definitely see a down day tomorrow.

Look what happened when SPX was up for six consecutive hours last time. We saw a big drop next day. But last time cycle was down and this time cycle is up. So may be the selling tomorrow will be less intense than last time. But more likely than not, it will be a red day tomorrow. So why take the chance. Why not re-enter at a lower level again. Isn’t that unbiased trading is all about?

I sold the long positions and twitted to my readers; http://bbfinance.blogspot.com/2011/12/trading-journal-december-20-2011.html  . I do not want to chase the bus. We will see how tomorrow unfurls and will take a call.

Do not get distracted by the noise. Do not read too much of dooms day preachers. They are same as the talking heads of MSM. To me, there are really no differences between Cramer, Prechter or Zerohedge.   One is telling you buy, buy, buy and the others are telling you to sell, sell, and sell. None of them are objective in their analysis and are totally biased with their own agenda. They talk about economics but even the economists do not understand how economics works and much less they understand how it affects the stock price movement. I do not say that I understand how it works, but at least I keep an open mind and look for opportunities in all situations. And yes, I do not believe that the world is coming to an end, even if stock market valuation is cut in half.

Anyway, that’s enough of ranting. Now let’s wait to see how things work out tomorrow but I am fairly certain that we will get another opportunity to go long at a lower level. Once again, thank you for following me in Twitter.(@BBFinanceblog)  That way you can always get the real time info and stay on top of the game. Visit http://bbfinance.blogspot.com/ regularly and profit from the World of Finance.