Things Could Get Interesting
With the recent sell off we’re closing in on some critical price areas. I’m writing today to make you aware that if price does reach this area, action may necessary. Depending on how the market reacts to these price areas our action may be protective, or it may be opportunistic. Let me explain …
I’ve been talking for weeks now about the market trading inside of this channel (see image) between the two trend lines. Over the last few weeks price has been moving ever closer to the bottom of this channel. This is a very significant area and should be major news. The market action around this key support area will be very critical.
Protective Action Required
Again, we will be either protective, or opportunistic at this area. If the market violates this major trend line in a significant way, it will be an important time to push the sell button and protect our money from further depreciation. Don’t forget, if we’re wrong, and the market does NOT fall, but rebounds, the model will get us back in very quickly. Remember, we’d rather miss out on a few percentage points of gain, than hold on through a heavy loss.
If the market does break this trend line to the downside, we will then be looking to the 200 week moving average for our next and last level of support to break our fall. If we end up breaking below this last level of support, then look out below, we are all out of nets. If you didn’t take protective action at the trend line, then this would be your final indicator to take protective action with your portfolio.
On the other hand, if price reaches this trend line, and BOUNCES, we could likely get another wave up and that bounce could provide a nice opportunity to buy. And when we do, we can set our risk, and implement our strategy to buy with limited downside.
In addition, there could be some opportunities from individual stocks. Yesterday I reviewed about 600 individual stocks in the Russell 1000. No less than 250 of them are approaching similar significant support areas. That is not uncommon, however, after reviewing 600 charts, I will tell you we are in for a battle as we are hitting on a major supply and demand zone. Again, these stocks present either great opportunities to buy, and set our risk… or sell and protect our money if you are long.
React, Don’t Predict
I have no idea what will happen and no one else does but the difference is I will actively manage my account based on price action as opposed to price prediction and I will certainly not buy and hold. The “predictors” are just guessing, and they don’t have a very good track record.
I have NOT discovered a secret investment formula.
- I simply understand the importance of selling
- I have an effective framework to sell
- I have an effective framework to buy
These practices can limit your losses and maximize your gains. I will show you how.