Tuesday, July 27, 2010

Tightened my stops...

The markets are now very extended and seem poised for at least a one day pull back. Also earnings announcements from both of the stocks I am holding are just around the corner. These factors combined with my belief that we are not going to get a significant intermediate term rally have lead me to tighten my stops in both ROVI and DTG.

I used the 30-min charts to identify major intra day support levels and decided to put my stop in ROVI below $43.50 and my stop in DTG below $46.88. If these stocks are really strong they should bounce before getting to these levels instead of slicing through.

So now I am in a position where I cannot lose but stand to make small profits on both positions although the profits would not be as large as I had hoped for. In current market conditions, I favor defense over offence for two major reasons. Firstly, with the high levels of volatility it is very easy to get stopped even after being in the profit on positions. Secondly, with earnings bombs dropping all over the place it is very easy for positions to blow up!

So be quick to take profits and not over trade by risking multiples of your usual R. If anything look to risk 1/2 R - 3/4R on trades in stead of 1R - 2R's.

Be careful in this market.

Good luck and good trading!

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