Weekend Review 02/01/2013

Earlier in the week I made an error in judgment by misidentifying an earnings date on a position and took a hit. Coupled with two other positions, in a 24 hour period I managed to lose 50% of booked profits that I made over the previous 19 trading sessions. Suffice to say it stung. Come mid-week a market signal I adhere to alerted me to be cautious and considering that my mental state was not conducive to holding trades I opted to liquidate most of my positions and take a step back. If there's one thing I've learned, trading down is better than trading through.

Friday started a new month and it was quite evident capital was flowing in. By happenstance the events that preceded allowed me to jump onto some fresh break outs. I suspect that there will be follow through on Monday after such a strong showing on the indexes and I'm curious if like last month the majority of the action will be on the first two days.

I have no concrete evidence, but from my perspective there is a continual rotation and higher probability of a fade the next day. I base this upon the lack of immediate follow through on a number of break outs that I've entered. I've reviewed my trades and feel like I'm becoming conditioned to give up quickly due to the number of reversals that have happened. Getting stopped out the next day has a tendency to do that, but overall if I gave a little more room and sat a little tighter there was more often than not a delayed follow through. An issue however, is that I also use a time stop of 5 days for my trades to confirm and the continuation move has been happening after wards.

What I've been focused upon doing as a result is sticking to the program but keep my exited trades on a watch list and enter on the secondary breaks which have had better success. I usually write off a trade because I'm twice shy, however the market over January has made me aware that taking that second shot has been beneficial.

From a breadth perspective not much has changed. It's clear that unless strong selling hits, the metrics I use will continue to be stretched. The main thing I need to be cautious of is becoming anxious, and to wait for the evidence. The Russel having a 1% dip on Wednesday seemed like the beginning at that moment only to clip a new high two days later. Now that I'm position robust going into next week my goal is to simply manage accordingly.