Replies to post #148632 on Zeev's Turnips Patch-No Politics (ZEEV)

[Zeev Hed]

MMM is much more of a snorter than IBM here, just look at the charts. MMM has some support at about $136/7 with mild overhead resistance at $145. IBM has a possible target to $78 which could easily be breached and a stop could be set around $90.5 on a closing basis, less risk than MMM.

[schloss_1]

Paul-

I mean quite literally ONE DIME! An example...UTX moves generally within a $1.50 range each day. Therefore, if it is up $1.25 at 10:00AM, I am watching it like a hawk. When it begins to falter on the upside, I place my order to short 1000 shares a few cents higher. After I get filled, I make out the 'buy to cover' order and make it a market order. Then I wait patiently. If it goes a dime against me, I cover and try again at a higher level. Once UTX has dropped twenty or thirty cents, I might set a hard stop for loss protection and move on to find another issue that looks to be straying too high or too low. One of the great advantages of trading only Dow components is that the Dow and Dow Tranny tickers are right at the top of my screen and usually signal trouble before individual issues move too much. many times I have covered a UTX short because the Dow began to rise and UTX had not joined the party yet, and it has paid off in spades.

The upshot of all of this is that, typically, I might lose $100 in a premature deployment, but when I finally get my position, I make many times that on the down leg. Naturally this works best with stock whose TA shows them to be good short candidates. Once the position is filled and the stock begins to go lower, I might hold it for days, weeks-- or in the case of LOW earlier this year--five months.

Obviously, this method has worked just as well on the long side, except that presently I am deploying very few long positions. The small volume and tiny trading ranges of the Dow each day, make me think that we could see some serious downside activity soon--AG or no AG.

Keeping losses small is the hardest lesson to learn, IMHO. Only after a year of trading have I finally taught myself the importance of this one, fairly obvious, fact. Better late than never, I guess.

One last thing. I think that the more mechanical your trading gets, the more money you will make. Trying to short 'snorters' because you feel this is more art than science, is a classic mistake. Better to short a stock that has already shown that it is headed lower than to try to pick the top with a snorter.

schloss