Trade is gaining ground, moving the stop to 11864...

Bought YM at 11874 with stop at 11855...

A Few Trading Lessons

• Posted by Joe Fahmy
• on December 14th, 2011

This past weekend, I wrote that we could see a potential market rally over the near-term. Since then, the market has dropped 3 straight days and none of the stocks on my watch list triggered upside buy alerts. As I mentioned in my post, I have no ego when it comes to the stock market. It doesn’t bother me when I’m wrong because no one can expect to be right all the time. Being wrong is just part of the game.

Here a few lessons from this week’s market action:

1) When you find a great number of trading setups (as I did this past weekend), let the market prove itself first before getting in aggressively.

2) Wait for a Follow-Through Day (FTD) to confirm that the market is in a new uptrend. A FTD is when the market has a convincing up day (approximately +1.5% or greater) on strong volume. This usually occurs on days 4-10 of an attempted rally. There is nothing wrong with trying to anticipate such a day (as I did over the weekend), however, you still need to wait for the day to occur.

3) It is ok to be wrong, but it is not ok to STAY wrong!

4) Even when we get confirmation of a new uptrend, don’t be in such a rush. If it’s a true rally, the market will give you plenty of time to make money. Remember, the fear of missing out is the downfall of most traders.

5) Cash is still king right now, especially because we are below both the 50-day and 200-day moving averages on the NASDAQ Composite. Keep in mind that 4 out of 5 stocks move in the general direction of the market, and right now we are still in a downtrend.

Bottom line, there is nothing wrong with forming a market opinion based on the information it gives us. The key is to wait for the market to confirm your opinion before getting aggressively involved. And finally, if you are wrong, it’s no big deal because it won’t be the first or last time it happens.

The market is advancing for a positive open?

I guess a buy in the open and close in the end is the play of the trade today.

The market is already oversold, nothing more to sell!

Bears are already covering in darkness and the bulls are roaring this early.

Let's see if the trend can be sustained till the close of the market.

The market is steady or stabilizing? from this overnight session.

Europe stocks are advancing per latest news reports.

Might be the start of the Santa Claus rally?

Who knows, let's see in the regular open how the market reacts.

After closing at key support yesterday, today we broke through it as investors and traders throw in the towel as hope disappears for an end of year rally.

With the bulls’ backs against the wall at the 20/50 day moving averages, we were at the point where we should have seen the bull camp mount a strong defense. And, while the probabilities were very high in my estimation, instead the sell pressure continued unabated.

What we saw today was more of the same ugly price action that continues to justify a defensive, cash-rich posture. Although greatly hesitant to do so, I must also caution that the price deterioration has now risen to the level that we’ll be fortunate if this is just another swing reversal amid the larger trading range as risk is also increasing for a crash-like fall. While I don’t say that without tremendous hesitation, I have to at least put it out there for consideration because when the market doesn’t trade the way it should and price continues to steadily deteriorate in this manner, it means we’ve got to do our job and put up every defense necessary.

Make no mistake – the market is now guilty until proven innocent. While it is still possible that we will still see an end-of-year rally just to screw those who’ve finally given up hope this options expiration week, until the price action shows significant improvement, man those battle-stations and protect your capital.

Courtesy from Kirk Report

Exited the trade at 11835 for a loss of 10 points...price action not looking good...