AFAM dragged down by the stock market weakness

Stocks
This is the post from Hello Suckers.
The stock market sank by 445 points again. Leading [tag]stocks[/tag] such as AFAM headed south pulled by the market without mercy and became a proof that [tag]trading[/tag] against the market is [tag]fools’ play[/tag]. Do not buy any new positions and wait for the market.

The [tag]stock market slump[/tag]ed again despite of the [tag]bailout plan[/tag] for automakers. The market is at 11-year low level.

[tag]Dow[/tag]
-444.99 -5.56% 7,552.29
[tag]Nasdaq[/tag]
-70.30 -5.07% 1,316.12
[tag]S&P[/tag]
-54.14 -6.71% 752.44

Another single day’s [tag]sell-off[/tag] and the entire [tag]market drop[/tag] more than 50% within 13 months didn’t spare [tag]stock leaders[/tag]. The stock [tag]market broke[/tag] through another psychological level when it undercut 7882.51 level reached in 10/10/2008 and sank down to a new level.

Dow Jones chart

When you take a look at the [tag]chart[/tag], you would see the psychological [tag]support line[/tag] which was established about a month and a half ago (1). The [tag]Dow[/tag] then shot back up, but on low volume, which was an indication that it is not a [tag]sustainable rally[/tag]. A few days later the market rocketed up again making almost historical one day swing (about 800 points within a day) and it basically created a [tag]rally support line[/tag] (the blue line).

However, OVB ([tag]On Volume Balance[/tag]) [tag]indicator[/tag] was still in down trend, even though the stock market showed a willingness for further growth. Just compare the rally support line with steep OVB downtrend and you won’t believe the rally much. OVB slowed down, but it didn’t change direction and it made the entire rally suspicious. In November 12, the [tag]Dow index[/tag] tested the support line for the first time and next day, it confirmed the end of a [tag]rally attempt[/tag] and we slipped back into correction (2). The third day it seemed we would be able to sustain the rally and the market would return back. No confirmation followed and stocks continued in downtrend on higher, rising volume.

Today, it undercut the psychological line (3) and closed below it. If it stays below it and on Monday it will continue below and/or lower, we may experience even lower levels. I started believe that Jon Markman was right when he predicted the Dow to be going down to 4000 points.

This market is really bad even for leaders. Many of the leaders showed good results such as AFAM, but despite their results they dropped down. The nursing care provider recently filled good economical results which bumped this stock up to $52 level. Since then, the stock has lost almost 26%. Within 10 days! AFAM is a great example of the stock confirming the [tag]strategy[/tag] not to open new positions when the market is against you. As Investor’s business daily indicates in their market review, AFAM cleared a [tag]buy point[/tag] on October 30th at $42.90. If you had bought your initial position at that day despite the market wasn’t in [tag]confirmed rally[/tag], but in rally attempt only, you would be happy with gains couple days later, but today you would be out by triggering a [tag]stop loss[/tag] order with 8% loss.

You could end up by collecting those small losses. With a small account we cannot afford such trading. I did it in the past and even at the beginning of this blog I was impatient and have bought stocks. Now it seems I will be out of the last owned stock with another loss, see the [tag]chart[/tag] below with my trading levels (indicated as RSS) and I am getting very close to my stop loss level (the red line):

AFAM

Tip: As I described above, it is not the right time for buying stocks even though they are damn cheap. Buying long positions against the market cost me a lot of money in the past. Don’t repeat the same mistake and if you are already in cash, sit tight and wait for the signal of the recovery from the market itself. Wait, save your money, make yourself ready for the next rally, study stocks and the market, and subscribe to this blog!


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One response to “AFAM dragged down by the stock market weakness”

  1. TO: http://www.preiserhoehung.de
    Sure, you can translate it and use it on your web site. Let me know when it will have been posted and I can provide a link back to your version too.

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