September 17, 2009 Stock Market Game Trades

Today was a great day for investors as many stocks soared. Why then, do I have so many short sells in my portfolio? I was told, a while ago by an experienced trader, that after a crash, like the market was experiencing early this year, many investors will watch their stock drop with hope that it will recover. They'll develop an emotional sell point at the price the stock first dropped to before it continued it's down trend. The idea is "If the stock rallies up to the point when I began hoping it wouldn't fall any lower, I'll sell it." Therefore, many stocks tend to peak right around that price and fall back down due to the huge amount of sales.

Well, many of the stocks that I have sold short fell, along with the market, during the latest crash. They are now nearing their value at the start of the crash. Along with the correct technical indicators, I'm hoping the stocks I've sold short will peak and fall as relieved investors get out of their stocks, and a selling frenzy begins.

As you can see in the picture above, my simulation portfolio is full and I do not intend to enter any new trades until I've exited some of my open positions. CREE seems to have taken a downward turn, and if it turns out to be a downtrend that lasts, I may try to exit it at a high point when the moving average is a ceiling. I am willing to change my exit strategy for that stock because the trend would no longer be the same as the trend I based the indicators on when entering the trade.

I'm excited to see if the market's rally will continue and we will see the DJIA reaching 10,000 soon, or if the market will lose its steam and repeat last October's results. Thank you for reading and, as always, I'll update you immediately with any trades I submit during the trading session.