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OK, let's look at some charts.
Last week I took some time to attend the Crown on the Continent Guitar Workshop & Festival in Bigfork, Mont. I wasn't there to listen to music -- I was there to play. For six days prior, I focused on my guitar technique (which had been sorely lacking), and did not think much about the market. I am a fairly accomplished vocalist, which is due to having a freakish four-octave range. It's not really something I ever worked too extensively to develop and, for the most part, the voice is a gift from the Almighty. It's nothing I've really earned, so there is no pride in having it. It's no different from inheriting lots of money: You can put it in your trading account, but it's not the same as having earned it.
But my guitar technique has always been suspect, because it's been easy to fall back on my voice -- I just find someone else to pluck the strings. So I never really spent much time working on becoming a better player. But things changed last year when I lost much of the hearing in my right ear. It really impacted the way music sounded to me. Frankly, everything sounded like a Neil Young song played by a really bad garage band. So I just stopped listening to music, and I stopped playing and singing. I was really down about it, but I figured there was nothing I could do.
But I was wrong.
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After a couple of months of feeling sorry for myself, I decided that I just needed to start listening to music, playing piano and guitar and starting to focus on doing the best I could. After a while, my hearing started normalizing with respect to pitch. I still have diminished hearing in my right ear, and anyone who talks to me in a crowded room will see me making "eye-to-mouth" contact as I try to read your lips. You'll also quickly discover that "huh" is a prominent word in my vernacular.
So going to the Crown of the Continent event was a big step for me, and it paid off. I actually performed there with three other guitarists in front of a crowd of about 1,000 people. Happily, I remembered all the lyrics (which is always a bonus when you're the lead singer) and didn't miff my guitar part, and I actually enjoyed myself.
Now, what does this have to do with trading? Two things come to mind.
First, if you've got one specialty, focus on that. Be the best you can be. But don't forget to branch out and learn other trading methods. They will serve you in good stead when your preferred method isn't working.
Second, each of us will face adversity in our trading career. Often, the adversity comes in the way of large losses. When you face this type of adversity, just step back and contemplate. Take a break, but don't quit. Start again when you feel up to it, but start slowly. Also, forget about making back the money that you lost. That money is gone. Someone else has it and they're not going to give it back to you, even if you were able to find them. Instead, focus on making new money. When you do that, you can start slowly and at a pace that makes you comfortable.
Restarting your trading activities after facing adversity can be tough. But if you limit the scope of your trading to manageable positions, you'll soon be back in front of the microphone singing beautifully -- and hearing most of it.
Let's look at four stocks that are working now.
Robert Half International has been on a stealth run since the stock broke out of consolidation in late April. I haven't heard much talk about it, but the shares are up around 18% since the breakout. What's impressive to me, though, is how the stock has been trading since gapping up in late July. The stock didn't hold above the gap didn't hold, and that is disappointing to those who had been foolish enough to chase the stock. (If you were one of them, then yes, I'm talking to you.) But the subsequent correction merely took the stock back to test the uptrending 50-day moving average. Basically, the stock is still in a nice, gradual uptrend that begs to be bought. As long as the stock remains above the 50-day moving average, it should be in your portfolio.
FedEx has been working its way higher since printing a bit of a "double bottom" in early February and again in April at around $130. The stock has been walking along the 50-day moving average, and it is now in a bit of a tight squeeze. This stock looks as if it's going higher, and I'd be a buyer now. As long as the stock remains above the 200-day moving average (currently at around $141), the bulls will remain in charge.
Visa has been steadily trending higher in a series of bounces along the 200-day moving average. While the Dow Jones industrials were basically flat yesterday, Visa was up 1%. Better yet, the stock is bouncing off an uptrending support line, along with both the 200-day and 50-day moving averages. So there is a lot of support at current levels, which makes this a "buy" right now. Keep the stop down just below $210. This gives you a small amount of risk with big upside potential.
This daily chart of Chipotle Mexican Grill shows a stock that is prone to making big moves after periods of consolidation. Over the past month, Chipotle shares have been trading in a very tight range, and that is making me lick my chops a bit. The stock couldn't break through $700 on Aug. 21 after a research analyst issued a bullish view of third-quarter same-store sales growth. But, since that failed breakout, the stock has been consolidating in a tight range. The next breakout is likely to work, so I'd suggest buying some stock right now. Keep the stop below $670 on that position. Then, if Chipotle breaks out above $700, add to the position. Viola! You're in with a cost basis of around $690.
Be careful out there.
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