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leading stocks have been strong for the last three weeks, with many positions
showing profits in the high single-digits to low teens. Since stocks don’t go
straight up in one big move, several pullbacks along the way should be
expected. The key here is to be able to spot weakness or strength in the
pullback. Is the stock undergoing heavy distribution or is there minor profit
taking? When leading stocks experience a pullback, we should base
our analysis and decisions on the weekly chart. The weekly chart smoothes
out day to day volatility and is the best way to handle a big move properly. In
fact, how our stocks ride through a profit taking period and even a mild
correction, can confirm where the big money is positioned. Institutional money
will step in to support the leading stocks. If we entered a position properly
(buying at a proper entry point on the chart) and have a good average cost
basis, then a pullback is where we might add a little to the position.
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Timely, as usual Scott.
Just started using weekly charts after listening to your latest webinar. It gave me a much better perspective and smoothed out some volatility. I'm hoping that they will keep me from selling too soon on the pullbacks, like I did with KORS and ALXN
Good advice Scott! I like your new emphasis on tips for managing portfolios in varying market conditions i.e. Beyond CANSLIM and HTMMIS in the webinars and the blogs. Yes we need rules and standards to keep us out of trouble but MarketSmiths will remain flexible and objective, examine the data and act in accordance with good judgment, experience, and a little bit of intuition. One can easily allow advice appropriate for some traders or in some market environments to color one's view in all market environments. Thanks!
When undergoing a correction of the type identified, should you modify your 'Stop' point so as to not be stopped out too early? If so, what are the criteria? In the "Book", the 8% loss rule is cited, and a later modification to 6% was suggested in one of the Webinars. Is this still the case? I recently got stopped out in a couple of positions using 6%, and sustained some losses. But then the stock promptly jumped back up in price presumably due to volatility issues with the big boys coming back in buying. How does one judge when to grin and bear it? Any clues?
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