This week has been very light on the economic news front, but it hasn’t been light in terms of gains. Volume was higher on the day as institutions stepped up in a big way supporting the market once again. The morning session gave way to sellers, but once again the market would not be held down. This market continues to go higher and the reasoning is not a concern to us. We care that it is going up and until we see sustained institution selling there is no reason to think this won’t continue.
Many traders are out there arguing against this market and fighting it tooth and nail. Others are simply “taking profits.” Trend followers simply react to price movements rather than emotions. We allow ourselves to let profits run and grow big while others dink and dunk. More importantly, trend followers do not allow losses to grow. Know your risk, know your exits, and certainly do not let emotions get involved in your trading.
CSCO reported earnings after-hours, but the stock failed to react positively to the news. The real story in after-hours was DMND and its restatement of financial statements. This is not a falling knife, more like a machete electrified. The stock fell more than 40% in after-hours trading. There have been quite few traders trying to pick a “bottom” in this stock. It appears they will continue to be looking for a bottom. DMND reminds us why we cut losses and why we DO NOT bottom fish. While we have stocks like NFLX, GMCR, CROX, AKAM, etc come off the lows, they have to prove themselves first. Falling machetes are deadly to your account.
Tomorrow we’ll get to see the market pundits yap about jobless claims, with the job picture seemingly looking better (who really knows, the government always fudges the numbers) claims should continue to fall. Does it matter to us as traders, not at all! We follow a set of rules governing our trading and trading off an economic indicator is not in our game plan. Follow price and check your emotions at the door.
Cut your losses!
