Pilot Positions Acting Very Weak

by OLIVIER on SEPTEMBER 30, 2010

Got stopped out of ANDE – Andersons today. It looks like the stock should be able to recover easily as it probably only tested its recent trading range around 36 – 37. Still, in my book the stock should have displayed more strength. So today my stop took care of my exit.

DNN – Denison Mines is not acting well either and was about to get stopped out as well. The stock has not developed any kind of momentum and there is no follow through at all. On the contrary, it has retraced all of the recent thrusting move and then some. That’s clearly not bullish action. Let’s see if I get stopped out soon or if the stock can recover. So far the weekly candle probably won’t trigger any buy orders from traders focusing on weekly charts as it likely won’t end up printing a long white candle.

Obviously I am not happy with those first two trades after my long break. Several things could be at the origin of the problem:

• My timing was wrong.
• It is the markets way to tell me being in cash is the best position right now.
• My overall market assessment was wrong.
• I bought stocks with too much overhead resistance.
  
• I bought stocks that don’t show enough buying interest, above average volume and momentum.

It looks like I wanted to be ‘conservative’ and instead of ‘going for strong stocks’ bought ’slow movers’. That implies that going for strong stocks is risky and not sound trading. Nothing could be further from the truth. Actually, I’ve been preaching about buying strong stocks without significant overhead resistance for quite some time now. Another pattern I look for is huge volume that implies a shift in tide has happened. Often it is accompanied by a big gap. My last two trades don’t fit either description. Maybe that’s the reason why they haven’t worked.

There is no way to tell what the real reason is though and sometimes it just doesn’t matter. You get stopped out and you move on. The important thing is to keep losses small. I am also trying to get smaller and smaller until things start to go my way again. Sometimes you are in a flow state of mind, and everything you do works well. Until I get back in sync with the markets my number one priority is to play great defense. The time to be aggressive is when your trading goes well not the other way round.

I want to end with a great quote taken from today’s Kirk Report:

As a general rule, losses make you strong and profits make you weak. – William Eckhardt

My public list with all my charts can be viewed here:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2791469

Buenas noches!