The stock market is oversold. Yet, it keeps going down. I am reminded of the Stochastics trading systems. The percentage of winners can be decent, depending on the parameters and risk management. However, the losers can often be whoppers, and the buy signal keeps going stronger as the trend continues in one direction.
For novices, stochastics are a popular technical indicator used to identify over bought and over sold conditions. Traders using stochastics often use it to trade counter-trend and try to call the turns. When I was a stock market novice, stochastics seemed like a great way to trade, now I rarely look at it. Why? It doesn't fit my personality, or my trading style. As always, your mileage may vary (YMMV), and there are many traders that do very well that use stochastics as one of their top indicators.
At the moment, I don't see anything that looks like bottoming behavior in the stock market. Sometimes the best thing to do is nothing. It seems high risk to go short or long at the moment. When the market is oversold, a big rally happens sooner or later. However, timing that move is difficult. Anecdotally, often times two rally attempts will fail before a rally takes hold. My opinion is that we haven't had even one decent rally in this latest decline. Put premiums on SPY remain very high as compared to their equivalent calls, so it is difficult for me to want to buy put options.
Positions: short RIMM hedged
No comments:
Post a Comment