Tuesday, June 12th, 2007
My new stock market correction strategy
When the market has sold off sharply in the past, I swung into action and immediately looked for short-selling candidates.
I was paranoid about a big crash wiping out my long positions.
But my recent research indicates that I have been too concerned about corrections, which are a normal feature of bull markets.
From now on I’ll still be looking for short-selling candidates (which are usually swing trades lasting from a few days to a few weeks), but also ramping up my scans of potential long trades.
I’ve found that my focus on shorts during corrections means I’m poorly positioned for a rebound. Sure I want to be hedged against extreme corrections with my shorts, but that doesn’t mean taking the eye off the ball when it comes to great growth stocks that lead a new rally.
I’ll be looking for stocks holding up well in the sell off, which are usually the stocks that break out of bases and make big gains when the correction is over.
As an aside, a lot of people are talking about corrections and rallies to new highs, but few are focussing on the possibility of a sideways, grinding market.
Word Count: 189. This entry was posted on Tuesday, June 12th, 2007 at 10:38 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
