The market continues to be very strong, but not too many of my stocks acted very well this morning. My main plays, the rare earth stocks, are mostly resting except for SHZ. SHZ was a monster this morning, bouncing off it’s lows of $8.00 and barely looking back. It looked to be setting up a perfect bull flag but has yet to make that secondary move. I was long looking for that move but am now flat.
But today’s topic is not so much about my trades as much as is it is about a lesson on recognizing “in-play” stocks. Sure we have a market that is up today, and to the casual observer it is a great day in the market. Professional traders, though look at things a little bit differently. We know that just because the market is strong, doesn’t mean you can just buy and make money.
This is definitely a market-stock friendly rally. Microsoft Corporation (MSFT), Apple Inc. (AAPL), and Google Inc. (GOOG) are all strong. If you trade the rare earths religiously like I do, you would see that REE, MCP and AVL are fairly weak compared to the market. SHZ is the only one that acted as strong as the market, and is where I made most of my money today. Sure, I could have bought AAPL and hoped I was right, but those type of trades are night where I am going to be able to make money consistently. That’s not my style. I stick to what works for me and don’t deviate.
Each trader has to determine his comfort level with stocks, and trade only the ones that fit in with his or her overall trading philosophy. Could I look to get into AAPL or NFLX this afternoon? Sure, but I would much rather focus on stocks like SHZ and DANG that provide greater opportunity for consistent momentum trading. The reason I make consistent money is because I know what I’m good at. I stick to what I know. Trying to be something I’m not doesn’t pay. I’ve learned that the hard way in the past and know that no matter how tempting a stock may be, if it doesn’t fit in with my strategy I will not touch it.
*DISCLOSURE: No positions
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