Pain Clouds Your Judgement
Stockscores.com Perspectives for the week ending September 17, 2006
|
| Upcoming Events |
Alberta Stockscores Events
Stockscores Club - Calgary
Meeting this Wednesday at the University of Calgary, Murray Fraser Hall 160
Free for first time attendees, $10 for returning members
Stockscores Seminars - The Stockscores Approach to Trading
Edmonton Tuesday Sept 26
Calgary Wednesday and Thursday Sept 27 and 28
Free to attend, learn valuable insight on how to uncover and trade opportunities in the stock market using the Stockscores Approach.
Click here to register for any of these events
|
|
In this week's issue:
Consider the following scenario:
You come to one of my seminars and I invite you to ask me my opinion on the stocks you own. You own six stocks and all of them are losing some money but nothing major. Taking me up on my offer to assess your portfolio, you ask me about each stock and then sit back and listen while I assess the charts of each. My response is not too encouraging, I tell you that all of the stocks you own look like they are more likely to go lower than higher and you should think about selling all of them. What do you do?
If you are like most people you grin and nod, thanking me for my comments. On the inside, you are thinking, "This guy is a total idiot, all of those stocks are highly recommended by that guy I saw on TV. I am not going to sell them all now, that would make me lose money."
The thoughts in your head prove that you are a normal human being.
You may know that the stocks you own are making you uncomfortable, they are not moving the way you expected they would when you bought them. But it hurts to think about selling them at a loss so you want to believe that I am wrong.
Now, what does the person sitting beside you, a person who does not own any of the stocks that you do, what does he think about my comments?
He probably agrees with my assessment. Looking at the patterns on each chart, the indications that the sellers have taken over control of the stocks, he can see why I think these stocks are more likely to go lower than higher. Without the emotional attachment to the money you have invested in these stocks he can see the reasoning for the dismal expectations.
Now, step back from this scenario and look at your real portfolio of stocks. Try really hard to take out the emotion and look at each holding rationally. Are any of your holdings losing you money? Are the Sentiment Stockscores of the stocks you hold below 60? Do you wish you had not bought any of these stocks and find yourself hoping that they go back to what you paid for them so you can get out?
If you answer yes to these questions, you may be holding a bad stock and have continued to hold because you are avoiding the pain of locking in a loss.
One of the hardest things we do as investors is sell our losers. Most of us ignore our losers initially and feel a lot of anxiety as they go lower and lower. Eventually, the pain of watching them lose money is too much to handle and we sell them at a big loss, wishing that we had just sold them when they started to show a problem.
Imagine how much better you could do with your investments if you could just get rid of the big losers in your portfolio. Most investors have them, those stocks that you have owned for a long time and are now showing too big a loss to consider selling them now. If you hang in there, maybe they will turn around.
Why are you holding the dogs? The overall value of your portfolio is not going up because you own them. They are not likely to make a big recovery and make that cash work. Wouldn't it be better to get rid of them and put the money in to something that has the potential to move up?
On a weekly basis, you should go through each stock in your portfolio and ask a simple question. "Is this stock more likely to go up or down?" If the answer is down, sell it. If you really like the story, you can buy it back later when the answer to this same question is "up".
How many of you will actually do this? I would guess less than 10%. Why? Most people are normal and avoid pain and pursue pleasure. So, you can do what a normal person does and ignore this commentary and go eat some chocolate or drink a glass of wine.
But remember, people who think like everyone else don't beat the market.
Back To Top
Chart patterns that predict upward trends are often characterized by abnormal breaks through resistance from periods of low price volatility, typically from a period of rising bottoms. The Stockscores Simple Strategy and Market Scan combines the Sentiment and Signal Stockscores with other Market Scan filters to find these chart pattern set ups. The result is a scan that will generate a good number of high probability position trading opportunities each week.Back To Top
1. PZZA
PZZA has been bumping up against resistance at $35 since January of this year but only achieved a breakout this past Friday. Volume was strong on the breakout and the rising bottoms in to resistance indicate optimism is the dominant investor emotion with this stock. The Restaurant sector has been on a surge the past few weeks as well. Support on this stock is at $33.75 and the stock is worth considering provided it can hold above the price floor.
Back To Top
References
Get the Stockscore on any of over 20,000 North American stocks.
Background on the theories used by Stockscores.
Strategies that can help you find new opportunities.
Scan the market using extensive filter criteria.
Build a portfolio of stocks and view a slide show of their charts.
See which sectors are leading the market, and their components.
Disclaimer
This is not an investment advisory, and should not be used to make
investment decisions. Information in Stockscores Perspectives is often
opinionated and should be considered for information purposes only. No
stock exchange anywhere has approved or disapproved of the information
contained herein. There is no express or implied solicitation to buy or
sell securities. The writers and editors of Perspectives may have positions
in the stocks discussed above and may trade in the stocks mentioned. Don't
consider buying or selling any stock without conducting your own due diligence.
Back To Top
|
If you wish to unsubscribe from the Stockscores Perspectives Weekend Edition or change the format of email you are receiving please login to your Stockscores account. Copyright 2006 Market Perspectives Inc.
|
|
