Monday, March 9, 2015

Monday Market Spotlight - March 9th 2015

Friday was an ugly day in the market with all the major indices dropping like a rock. It ended up as a 2% drop across the board last week. Looking deeper, all major sectors took a dive after consolidating for the last 10 sessions. You may recall, the market did a very similar thing during a major correction in Oct of 2014 and again in Dec of 2014.  Within just 7 sessions the major indices dropped below the 50 day moving average. This is not something you should have to experience under any circumstances!

The market behaves this way consistently so you've got to have an action plan ready to help mitigate your potential losses. You never want to be a deer in the headlights when things turn and you make sure you conserve your capital. March and April are traditionally the best months in the market so it's good to have capital on hand to take advantage of that.  If you play it right, these two months can make you or break you for the year. 

Here are 3 things that I am doing to mitigate my losses in the market so that I can conserve my trading capital:


  1. Review: I study my personal trade plan by looking over the stock charts.  I do this to make sure the position is performing to expectations.  If things aren't lining up and performing as expected, I look at what my next steps should be.
  2. Take Profit: Whenever I have a specific profit goal, I mark it appropriately on my trade plan.  If a position is doing well in spite of a market down turn then I may adjust my exit plan and, perhaps, add to my position. I may also take some profits to reduce my total risk and free up cash to take advantage of other opportunities that I'm seeing.
  3. Exit Planning: This may actually be the best way to conserve capital.  I study the charts and take immediate action to close out the positions when it meets my exit criteria. I take the emotions out of the picture and remain disciplined. Remember, you need capital to execute new positions when the market goes back up!
I recently highlighted several stocks:

  • SWKS
  • AVGO
  • PCYC
  • SLXP
  • VRX
  • NXPI
  • SBUX
  • BILB 

Several have already made substantial gains. If you took positions on some of these, make sure you review your trade plans for profit targets. I always like to take action and harvest some profits when I can. Stay with your original plan and don’t let emotions or greed get in the way. It's always better to avoid having to give it all back to the market. 

I am looking at some stocks that weathered the conditions last week.

  • SBUX
  • ROST
  • LNKD
  • ORLY
  • NCLH
  • HAR
If you're in the Tampa Bay area, we have an IBD meetup tomorrow.  Please let me know if you'd like to attend and I'll make sure we have space available for you.  The meetup is a great chance to discuss some of these stocks.  We can also share our trading plans and discuss loss and profit targets.

Keep an eye out for my post on Wednesday where I will dig deeper into how you can create a trading plan.

Amin Hemani
investorspotlight@gmail.com
Twitter: SpotlightAmin


DISCLAIMER



Do not take a position unless you are prepared to sustain a TOTAL LOSS. Your loss could include the money you invested as well as commissions and transaction charges.


The Information I provide is for education and informational purposes only. The Information provided is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The Information provided is general in nature and is not specific to you or anyone else.


YOU SHOULD NOT MAKE ANY DECISION, FINANCIAL, INVESTMENTS, TRADING OR OTHERWISE, BASED ON ANY OF THE INFORMATION PRESENTED WITHOUT UNDERTAKING INDEPENDENT DUE DILIGENCE AND CONSULTATION WITH A LICENSED PROFESSIONAL. You understand that you are using this Information AT YOUR OWN RISK.