July 30, 2008
I definitely, first off, do NOT watch CNBC. This should be the last thing all of you newer investors should do. A lot of people that watch CNBC tell me that they do not have enough time to read Investors Business Daily and instead find it easier to listen to the raving madness of Cramer. This is baloney. All you need is 20 minutes a day to read ‘the big picture,’ ‘the investors corners,’ and any of the other investors education articles.
If you do this every day, I realize that it will not be fast, but eventually you will learn the right way to make money in the market. The same way the greatest traders ever, which were detailed year by year by John Boik in his fabulous books, traded is the same way you should invest. If the greatest all invested a certain way, shouldn’t you to?
Some of you believe that you can outsmart the market or you are lazy and believe that a method that has been PROVEN not to work (using P/E ratios to buy and sell stocks) will work especially for you. This idea must be dropped and you must learn that some very smart people have learned that the best time to invest is ONLY when the market is in a clear uptrend. A few of the greatest of all time know to be long certain stocks even in a bear market. For instance, the smart money managers are long biotech and medical stocks right now while they sell financials. This is clear to those that are experienced but for the newbies this can be very confusing.
That is why you must start learning now. Learn now what worked in the 1890’s and learn what worked in the 1990’s. What worked then will work now. You can not give up in a bear market. If you lose money now, stop trading. Pick up some of the books that I have recommended on my site and get reading. When you notice the market starts going up again with a lot of stocks participating (right now that is not happening–hence the new lows beating the new highs), that is the time to get long again. But when only a few rally with the index it is still time to exercise caution and learn up on how the greatest of all time traded/invested.
You will quickly learn that they did not buy stocks against the trend. There are very few charts that are moving up and even though I know how to find them thanks to Telechart does not mean that most people will be able to play along. 75% of stocks follow the trend of the market. So if the trend is shaky or down, why try going long. Instead read those books that I have posted on my website. This is the only way to learn about the future; you must learn from the past.
Besides that I do one of the greatest things that I think everyone on the internet who is a professional should do. I have posted 70% of my biggest winners since 1999 on this website. I have posted them for free so that you can see what they looked like when I went long and you can see what they looked like when I sold them at the top. You can learn so much from these examples that I do not think some of you are taking the time to study and memorize patterns that showed up in the bull markets that ranged from LMLP in 99 to HRZ in 06 to PDO in 08. These patterns do not show up and work for no reason at all. History constantly repeats itself and while it is very important to pay attention to fundamentals at all time, when you get chart setups like this, including stocks like TESO and AFSI in 2007, you can not pass on the supply/demand setup. These charts have been posted to show you what some of my best stocks have looked like before they go on to their biggest runs. One thing should be noticed, 90% of the time the market trend is up with the stock.
I hope a lot of you are studying these stocks but some of you do not know when to sell to take profits. I here of some of you taking all of your profits on a stock once it is up 10%. Well, I guess you missed DGLY and PDO, even though the gains in BRKR and BKE did evaporate, they never hurt us enough to make a significant impact. Eventually another bull market, even if it is a bear market or choppy market bounce, and will give us another max green BOP beauty. Don’t be a sucker and pass on it like so many did on APPY in 2007. Until 2007, I can only remember one stock that broke out of one of my beautiful patterns that failed immediately. This told me that all the failures in 2007 and 2008 were warning us of this bear market that we are now in. But do not for one second think the patterns that worked in 2003 will not work again. Only those that give up now will miss out on this. Trust me that will be too many. Too many do not realize that markets like this are made for a reason. To get rid of the weak. That always helps the strong make a lot of money when the market does lift higher under its own natural movement.
Until that natural movement higher comes, there is still a lot of learning that new investors need to be doing. If any of you out there have not read/listened to “Reminiscences of a Stock Operator,” it is time to buy the book or buy the itunes edition of it and get that book under your belt. You will learn that even in 1920 a man figured out daytrading was not the way to big profits but instead a system similar to CANSLIM was the only way to major riches. This book will prove to you that nothing new is under the sun. What worked then will work now. The only time it doesn’t work real well is in choppy markets but even in a choppy market there will be up swings with some good stocks and some down swings with some real weak stocks. With $1 commissions now the norm to $5, there is no reason to take strong signals when you get them. Just make sure you cut your losses quickly if you are wrong. But if you are new you might want to wait for a bull; some of you sell way to fast and will NEVER hold a TASR. NEVER!!!!
How are you going to hold a TASR if you can’t even hold a stock like BAX moving up. Some of you need to buy the book “How to Make Money in Stocks” by William J. O’Neal and “How I Made Two Million Dollars in the Stock Market” by Nicolas Darvas. This will help you learn to hold a stock as it moves up instead of selling a rising stock way to early. You may get lucky once in a while and avoid a nasty selloff and lock in a 10% move. But when NTES or TASR moves 2000% in under 12 months and you are stuck with a 10% gain, trust me, my friend, you are going to be the donkey. And being the donkey is the last thing you want to be.
In this market a lot of donkeys are out there. There are only a handful of charts that are even nice and nothing is perfect. Until I see a perfect setup like ACM was SUPPOSED to be and would have been if the year was 2003 (those chart patterns like EGHT EVOL USNA SSYS etc… all made the same pattern and worked) there is no way I am going to get excited and call a bottom too quickly. I think we still probably have more pain in the commodity area. If that is the case, living on Maui sure is going to hurt.
Aloha and I will see you in the chat room where we can get back to the business of trying to find some max green BOP wanna-be’s. ALOHA!
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