Jim Cramer Blog

1 Comments:

• At 5:21 PM ,  wallmann said...

  A lot of people wonder how in the world to make a trade in a market where choppy mood swings are
  
  an every day event. When this happens, instead of blindly throwing money at a stock you think
  
  should run, you have to take into account what "could" happen if you are on the wrong side of a huge
  
  drop.
  
  What is the average trader to do? Well, during the worst volatility, sitting out is probably the
  
  wisest choice because you can get so whipsawed it makes your head spin. But if you are one of
  
  the personality traits that says "I'll conquer this volatility and anything else that gets in
  
  my way," here are some suggestions to help you do just that. First realize that every average and
  
  every stock has a "trading range" that it goes through every day. For some issues it's only a 1/2
  
  point, but on some issues it can be much more. It becomes very necessary for you to look at some
  
  charts and get a feel for how much your stock ranges in the course of normal trading before you can
  
  identify a move that is "outside" its "normal" course.
  
  So what do you do about that "abnormal" move? Do you sell in fear, or hold and hope? Here is a
  
  tip for you that may help. Unless a stock has some fundamental reason to move higher such as a
  
  news release, a stock split, an upgrade, etc. it will pretty much behave in step with the
  
  overall market. A "good stock" in the tech sector may be up nicely and moving well with the NASDAQ
  
  up 20 points, but if the NASDAQ tanks, you can bet your stock will too. So, your tech stock
  
  that is now down outside the "normal range" could certainly be there because the NASDAQ as a
  
  whole is now down 40 points. Now the question really isn't "what's wrong with my stock" because the
  
  answer is nothing, the question is "what's wrong with the NASDAQ?"
  
  This is where technical analysis actually becomes important and learning to spot support levels
  
  comes in. Let's say that your tech stock that just took a beating has good support at a certain
  
  level. If the move down hasn't violated that support level, keeping the trade in play probably
  
  isn't a bad idea since chances are the NASDAQ will have a move to the upside and bring your stock
  
  back up with it. But, if the loss violates that support level, bailing out may be the best choice
  
  since so many buy/sell programs are based on resistance and support that it could cause even more
  
  damage to the issue.
  
  On the other hand, if the stock you were in was a pure momentum play and support is several points
  
  below, it is often wisest to cut your loss quickly and get out while you can. When a momentum
  
  stock gets pulled back outside it "normal" range, it is often a bad sign, no matter what the
  
  averages are doing. So, in times of big volatility, knowing where technical support levels are
  
  in your particular stock, will often help you decide if you are still "okay" or about to get
  
  creamed. Learn the basics of reading a chart and study them so you can recognize support and
  
  resistance in a heartbeat, they will ultimately help you a lot!
  
  For your no cost audio on Creating Wealth and a two week free trial
  to our newsletter, just send a blank email to: stockswatch@sendfree.com
  
  Then visit our blog at: http://IBuyProperties.blogspot.com

   

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