What do you do with a market that
gaps higher and simply keeps going?
That is without a doubt one of the toughest markets to play folks. What we
all want to see a a market that opens flat, and starts a series of 'waves"
that take us higher. But what the heck do you do when a market opens up 50,
adds 40 more in a heartbeat and then goes on for 100 more points? Well it
isn't easy, and it takes a strong backbone, but its certainly playable.
When you get a market like that, one that just "feels" destined to have a
big day, although it doesn't give you pullbacks to reload on, what it does
do is "pause". It might gain 20 or 30 points
and then the averages rest. But if you were looking at individual
stocks, each time the averages paused, you might see the leaders start to
fade a bit. Now they may not drop 2 points, but in a whacked out market,
you may have to be happy with watching it fade back 50 cents. Then as the
averages start to tick higher again the stock you are watching starts to
turn back up and often it will run well again.
So, the plan is to have a couple stocks that you are liking for the day
and watch the action. Lets say that you like XYZ and its 45 bucks. But it
opens at 46.25 and goes straight to 47.00. then the averages take a rest
and XYZ fades back to say 46.45, and then you notice the DOW ticking
slowly higher. Soon the NASDAQ is up a couple more. Suddenly XYZ the
stock, is at 46.60 and climbing. Its at that point that if the market
feels good to you, you have to take the shot and hop in. Is it a dangerous
feeling? Absolutely! Nothing scares the heck out of me more than buying a
stock long that is already up almost 2 dollars on the day and its only
9:45 AM!!!
But, when the market is in "crack" mode, a stock that is up 2 can easily
be up 4 so you "have" to go with it. Naturally we don't get careless and
we put a stop on it, but the biggest danger in a situation like that is
doing nothing. If you sit there frozen like a deer in the headlights, the
stock is going to run away from you and you will spend your time trying to
hunt for another one instead of making money!
One last note> Often when the market is running amok, we get into
a habit of chasing around the net looking for the next one to make a big
move. Do yourself a favor. Plan your trades and trade your plan. If you
start going bananas looking for everything that is running at the same
time, you will more often than not get in at the highs, and spend so much
time hunting you don't get any trades made. (IMO)
gaps higher and simply keeps going?
That is without a doubt one of the toughest markets to play folks. What we
all want to see a a market that opens flat, and starts a series of 'waves"
that take us higher. But what the heck do you do when a market opens up 50,
adds 40 more in a heartbeat and then goes on for 100 more points? Well it
isn't easy, and it takes a strong backbone, but its certainly playable.
When you get a market like that, one that just "feels" destined to have a
big day, although it doesn't give you pullbacks to reload on, what it does
do is "pause". It might gain 20 or 30 points
and then the averages rest. But if you were looking at individual
stocks, each time the averages paused, you might see the leaders start to
fade a bit. Now they may not drop 2 points, but in a whacked out market,
you may have to be happy with watching it fade back 50 cents. Then as the
averages start to tick higher again the stock you are watching starts to
turn back up and often it will run well again.
So, the plan is to have a couple stocks that you are liking for the day
and watch the action. Lets say that you like XYZ and its 45 bucks. But it
opens at 46.25 and goes straight to 47.00. then the averages take a rest
and XYZ fades back to say 46.45, and then you notice the DOW ticking
slowly higher. Soon the NASDAQ is up a couple more. Suddenly XYZ the
stock, is at 46.60 and climbing. Its at that point that if the market
feels good to you, you have to take the shot and hop in. Is it a dangerous
feeling? Absolutely! Nothing scares the heck out of me more than buying a
stock long that is already up almost 2 dollars on the day and its only
9:45 AM!!!
But, when the market is in "crack" mode, a stock that is up 2 can easily
be up 4 so you "have" to go with it. Naturally we don't get careless and
we put a stop on it, but the biggest danger in a situation like that is
doing nothing. If you sit there frozen like a deer in the headlights, the
stock is going to run away from you and you will spend your time trying to
hunt for another one instead of making money!
One last note> Often when the market is running amok, we get into
a habit of chasing around the net looking for the next one to make a big
move. Do yourself a favor. Plan your trades and trade your plan. If you
start going bananas looking for everything that is running at the same
time, you will more often than not get in at the highs, and spend so much
time hunting you don't get any trades made. (IMO)
