I think it would be advantageous to include RSI divergence into my stockpicking. If a stock is diverging negatively during its base, it might be more prone to break down at the 10/50dma, and vice versa. I’ll back test and see.
Harmony was fine to buy given the circumstances but SBGL should have never been a buy. I also should have waited a bit to add to CDE and AUY given they had run 400% without a break. I should have waited for a consolidation.
When sectors such as commodity stocks have had long periods of industry slowdown, the risk of heavy dilution is very real when price starts to rise back from the ashes.
Conpanies that are on the brink or that have needed to cut major costs are likely to make offerings at elevated stock prices to pay off extra debt or finance new activities.
I took a look at some Construction stocks and most seem to have broken down on heavy volume recently. some are still doing well like MLM, IBP, VMC.
Some Regional banks on the other hand seem to be catching bids and flagging nicely.
Market is in an interesting juncture where building related commodities could come down, but precious metals could rise. I will position appropriately when I get the appropriate context.
If you see and feel like you’ve been trapped, get out the same day. It’s worth the capital preservation over the risk of missing out on gains.
Two things I want to increase my discipline in:
1. Not buying a stock that is down after earnings on big volume, even if it bounces back. However, sometimes I still might buy this if I feel the selling is overdone. In this case, if the price doesn’t recover substantially by the close, SELL IT! Before the close
2. Not using cash to buy more stocks when the market has had a ton of distribution days and or is in sell mode. Have the discipline to wait until a buy signal before buying.
3. Tighten stops when the sell signal hits. Consider letting a stock go once it violates the 10 day instead of the 50 and possibly intraday instead of the close. Just to preserve capital
I am considering adding a sell rule to my strategy:
That is when price gets to a strong point of resistance and also exhibits a reversal candle, I may sell depending on the speed of the run-up and the volume involved. If I decide not to sell that day, I will watch the volume in the coming down days. If the volume exceeds the prior up day/days. I will strongly consider locking in profits and getting back in later.
ex: INO on 4/28/16, could have sold on the 28th or the 29th on the increased volume and saved myself another 9% of gains erased.