One of the hardest things to do in trading and investing is properly positioning yourself short in the market. Why is this so hard? It’s hard because of what you can’t control. Sure you “know” that the market is heading lower J What you don’t know is when. You have to position yourself before it’s obvious to everyone else. Better said; you have to prepare to short while the bulls are running right next to you.
You also have to deal with the following when navigating the shorting landmines…economic reports and how the market interprets the information, stocks hitting extensions to the downside and bouncing higher… like PCLN today, which hit the 200-day simple moving average. You’ll have to navigate market sentiment – is it time to bounce higher? Just what does it mean to be oversold or overbought and who makes that decision and on what timeframe?
Get the picture?
So what can you do to make life easier on yourself? Be in markets that are not stocks – such as the crude oil market and the bond market. You’ll want to harvest profits when crude and bonds reach price targets/extensions. I’ll cover this in my weekend video. You’ll also want to add when these markets pull back to the 8-day exponential moving average – like crude did today.
When I say “add” I mean continue to trade the size that makes sense for you. Size is your weapon… it controls your emotions and let’s you sleep at night. Always ask… what if it doesn’t go up? Where are you going to cut crude free is it goes lower? For that try two closes in a row below the 21-day EMA.
If you’d like to review my past ideas or get caught up on the crude/USO trade click here.
If you want to come into my office and trade with me send me an email (tim.reazor@noramasset.com). It would be a pleasure to meet, bond and commiserate together.
I often talk stocks and markets on twitter – you can follow me @TJReazor
I hope tonight’s newsletter helped.
Best Regards,
Tim
