Friday, September 15, 2006

Help me Bill!

I'm pretty discouraged about my recent buys. First of all I wasn't patient with DRIV and dumped it WAY too early. Second, I was stopped out of my NGPS position while flying to San Francisco when my trigger price was exceeded by a friggin' nickle. The stock then had a 6% bullish reversal in the second half of the day.

I'm writing this blog for one simple reason. All of the great traders would record their market operations and analyze their successes and mistakes.

Let the analysis begin.

First, I have to ask the question: why did I sell DRIV? Did the base pattern fail? No. Did the market go into a downturn? No. Did the stock fall below 7% of my buy point? No. The only reason I sold it was because I didn't see any leadership. For instance, the dow and nasdaq were moving up, but the IBD 100 was falling. Usually the IBD 100 should be leading the dow and nasdaq. What is my reanalysis? I think it is pretty clear that the reason why the IBD 100 was going down because the index was riddled with oil stocks and there has been a serious sector rotation out of those equities. Of course the IBD 100 is going to drop until the oils are purged from the index. Also, I didn't consider the fact that DRIV could actually BE a new leader.

As if to rub it in, IBD published a story in the "Investor Education" section that I probably could have used a week ago. It was entitled, "Most money is made by waiting, not trading", which is a quote from Jesse Livermore. Basically it was about being patient and not selling too soon.

The NGPS sell was just unlucky and now I realize why so many great traders hate stop-loss orders.

So now what is my plan. First, and foremost is to not fight the tape. I have already started looking for good charts and proper buy points. I'm watching SIGM very closely. Most importantly, I'm re-reading some of Bill O'Neil's books (pictured above) and planning on not repeating my errors. Speaking of Mr. O'Neil, he will be on the Tom O'Brian show September 26th. You can listen to the podcast or just download the MP3 from the TFNN website.

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