Celgene Keeps Climbing

This column was originally published on RealMoney on July 5 at 10:02 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.

Many traders seem to have confidence problems. They are either overconfident or lack confidence. Each problem will cut into profitability in its own way. And both stem from the old rule that you're only as good as your last trade.

A trader who has a series of profitable trades is at risk of concluding that he has mastered the market. He has finally realized his true potential and now can get on with the business of getting rich.

This epiphany leads to a tendency to overtrade. After all, when you are supremely confident in your abilities, doesn't it make sense to trade more? Heck, trading less would be silly. You are seeing things so clearly that you want to seize on every opportunity.

Conversely, the trader who suffers a string of losses risks losing so much confidence that he is paralyzed. All of a sudden, he is so riddled with self-doubt that he starts second-guessing himself.

If his research indicates that a stock is likely to move higher, he'll refrain from acting. He'll doubt his own ability and instead adopt the armadillo position, curling into a fetal position within impenetrable armor. If your defense is so tight that you avoid trading, you'll never make any money.

The remedy for both confidence problems is the same: Adopt some explicit rules for trading and stick to them. Cold and hot streaks are a part of trading. You'll experience both.

The real challenge lies in minimizing the lasting impact of these streaks. Rather than reveling in your invincibility or dwelling on your excessive fallibility, spend time every day reviewing your rules. Scrutinize all of your trades and try to learn what went right and what went wrong. Strive to approach each new trade without memory of how the last one turned out. The market doesn't remember, so why should you?

Let's get to the charts. Today, we'll look at Celgene(CELG Quote), Las Vegas Sands(LVS Quote), Marvell(MRVL Quote), TIM Participacoes(TSU Quote) and Hologic(HOLX Quote).

Celgene is at an all-time high, and it doesn't look much different from the way it did when I featured it back in April. The middle Bollinger Band continues to define the bottom of the trading range. I'd stay long unless the trendline broke.

The past couple of months have seen Las Vegas Sands consolidate after a fairly volatile uptrend. While the chart has looked a bit toppy at times, last week's breakout seems to confirm the bull case. I'd expect the stock to move higher from here. However, the best entry probably would be on a retest of the breakout level. We're not seeing that yet.

After a multiyear run, Marvell has spent most of 2006 retracing the last $25. After the high-volume pullback we saw last week, I'd be looking for a bit of a bounce now. But heavy supply around $55 is likely to cap any rally at a lower high. If you are short, you might want to consider taking some off the table now. You can always reload on the next advance.

We last looked at TIM Participacoes a few weeks ago when it was down below $24. I noted that the consolidation in the low $20s signaled an end to the downtrend. TIM is well below the very recent high of $41, so the bulls will have to chew through a lot of unhappy stockholders who are likely to sell when they get the chance to break even. If you are long, I'd put a stop back below $28.

Notice how Hologic had been holding firm at the $50 level during the first quarter of 2006. But once that level finally broke down, the stock fell another 30% before finding some buyers. Now, the stock is right back at $50 on a high-volume explosion. I'd look for the stock to rest for a bit now. And if you're long, you might consider protecting those profits with a tight stop.

Be careful out there.

P.S. from TheStreet.com Editor-in-Chief, Dave Morrow:
It's always been my opinion that it pays to have more -- not fewer -- expert market views and analyses when you're making investing or trading decisions. That's why I recommend you take advantage of our free trial offer to TheStreet.com's RealMoney premium Web site, where you'll get in-depth commentary and money-making strategies from over 50 Wall Street pros, including Jim Cramer. Take my advice -- try it now.