Are you still sitting on your hands?

In my last market update I told you that I was doing nothing for a week to 10 days. I suggested to everyone that this would be a good plan after the little pull back we had last week. If you listened and watched the charts you were safe on Friday when the Markets pulled back. Some times the markets will send a signal before a market reversal takes place. It’s usually subtle but it’s usually there. This one happened to be one week before. I also said that if you had to trade, to trade small. If you did take a position hopefully you didn’t jump right in with both feet.

So where do we go from here. Keep sitting on your hands. The uncertainty in Cairo and many broken patterns in the market make it very uncertain. It’s best to wait and see what develops over the next few business days.

Let’s talk about Time Frames. Your time frame is if you own a stock, is it a short, moderate or long term hold. This time frame will help you make a decision in times of uncertainty and market pull backs. For instance, using FORD (F) for example. F has had a great run for a while now, actually over the past 1.5 years from 1.00 to 19.00. Over the past 6 months $14.00 to $19.00. If you have a long term hold you have no concern over the $2.50 pull back that F had on Friday. But if you are a Momentum trader holding stocks for 1 week to 2 months. This pull back just ate up all your gains if you did not sell F before earnings. You just lost 2 months of hard work and because F is possibly in a broken stage it will take F another 4 months to rebuild and begin to move up again. 6 months of DEAD money. If your using your money to make cash flow and constant gains then you did not have a good Friday. But, if you have F for long term, you plan on holding for years. You didn’t mind at all and welcomed or even bought more. Both Time Frames are right! It depends on you personal plan and goals. By the way, a pull back in F is a normal healthy thing and for the short term trader we just need to find where the base is and possibly buy more.

Time Frames are thought of when you put your trading thesis together. Example, APPLE (AAPL) Your thesis is to buy it, forget you bought it because you believe it is the growth stock for the next 2 years. You do not care where it is in the market cycle, you purchase it and forget about AAPL. Conversely, Apple (AAPL) is declaring earnings in March. Your trading thesis is to purchase AAPL to ride AAPL into earning to capture an earnings run selling it just before earnings. Same company two very different plans but both are good.

Every time you purchase a stock think about your Time Frame ask yourself what would you do if your stock appreciates substantially or declines rapidly.