3SOF

Shorted GT at $26.37.  Wish me luck.

Some stocks are on fire, of course. But there's a problem with most rallies if we're in a bear market: they're selling opportunities.

This "stocks on fire strategy" to make great percentage returns with a small capital starting base is not new. In 1998 I made 300 or 400% in 3 or 4 months just switching from one stock on fire to the other (not in the US).

But suddenly the stocks on fire that I was buying went down after I bought them. I couldn't understand why. I knew there was a bear market, but I didn't think I would have to change my individual stock selection strategy. I lost those 300% profits pretty quickly, almost as quickly as I had made them.

It is a very different thing, a rebound in a bearish trend than a bullish breakout.

The US stock market is so big, there are so many stocks, that some will indeed breakout and rise a lot. But most rallies will fail to continue, and stocks will go down after the rally.

Quote from: dhiraj19 on March 01, 2007, 03:58:49 PM
David,
As you are bull on gold, can you see CGR?
Thanks,

I'm still not sure if I'm a bull on gold, I have some fear that it is too early. I have to think and study more on that subject. Please suggest CGR for tomorrow's poll, I'll be glad to write an analysis on it.

Thanks.

David, let's assume that you were spot on and that the coming weeks/months will be more red than anything else, so we would be in a bear market!
What will your strategy be like? I know you said you maybe want to go for a 70/30 short/long but I assume that a bear market goes with ups and downs all the way down! Would you also play this bearisch trend pure technical on the charts, in other words, after several weeks of a  huge drop, when the market starts to recover a bit, would you 'go long' again for a short time, if you know what I mean?! So trying to get the maximum out of the trend or is it almost impossible to play it this way? Tia!

Quote from: Se7en on March 01, 2007, 04:04:02 PM
David, let's assume that you were spot on and that the coming weeks will be more red than anything else, so we would be in a bear market!
What will your strategy be like? I know you said you maybe want to go for a 70/30 short/long but I assume that a bear market goes with ups and downs all the way down! Would you also play this bearisch trend pure technical on the charts, in other words, after several weeks of a  huge drop, when the market starts to recover a bit, would you 'go long' again for a short time, if you know what I mean?! So trying to get the maximum out of the trend or is this almost impossible to play it this way? Tia!

My experience tells me it is a gamble to try to buy stocks for a counter-trend rebound. There's a big difference between gambling and speculating. I'm speculating there will be a worldwide recession in 6 - 12 months time. I need to be short for that outcome until it indeed happens (in that case I'll cover with a nice profit and probably go long), or else I'm proven wrong, and in that case I'll pay the price.

Livermore said the following about that particular issue:

«That is about all I have learned - to study general conditions, to take a position and stick to it. I can wait without a twinge of impatience. I can see a setback without being shaken, knowing that it is only temporary. I have been short one hundred thousand shares and I have seen a big rally coming. I have figured - and figured correctly - that such a rally as I felt was inevitable, and even wholesome, would make a difference of one million dollars in my paper profits. And I nevertheless stood pat and seen half my paper profit wiped out, without once considering the advisability of covering my shorts to put them out again on the rally. I knew that if I did I might lose my position and with it the certainty of a big killing. It is the big swing that makes the big money for you.»

Quote from: BigSully1 on March 01, 2007, 03:59:23 PM
Shorted GT at $26.37.  Wish me luck.

Best of luck

Going long would be very risky to try to catch the little upside in a downtrending market. It would be best going with the trend and possibly swing trading a portion portfolio. I was thinking of adding main core bear positions and swing trading like 25% of the portfolio on the short side. For instance the stock XYZ goes down 10% with the market I have 1000shrs in stock XYZ. I would cover 250shrs of XYZ and let the rest ride up then reserve cash to re enter a position of 250shrs on the next uptrend that fizzles.

The 3 Stocks on Fire Portfolio rose 2% today.

I'm still undecided if you want to study individual stocks or the general market trend? Or just brief technical studies on stocks on fire, disregarding the fundamentals? Or random talk, covering everything at the same time?

Will think about it, and perhaps even make a poll on that. Anyway, time to rest now, see you tomorrow