In [the September 28] newsletter . . . under "Our plan" heading, Mr. Johnson writes "... we will look for stocks that are trading back near support and those that made good moves today but show early weakness." Could you tell me how to do that? (September 30, 2000)
What we do heading into any trading session is know the stocks we are really interested in detail. Specifically, we want to know support, the breakout point (if we are playing that) or near resistance if any, average volume, what type of play we want to make on the stock (e.g., bounce off of support, breakout momentum), and what position we want to take if things work out.
On the plays we were discussing in your question, we felt that stocks would bounce after testing support or fell back after a good move and looked to run back up, and we wanted to catch that move. With the information discussed above, we can either watch the stocks on realtime, use our Palm VII's, or talk to our broker and decide what we want to do, if anything. This information helps us build a picture in our minds as to what the stock is doing; something like visualizing the play or shot in sports before making it. The broker tells us what the high and low is on the session, the volume, where it is now and where the overall market is. We apply the information we have on the stock from our cheat sheet (usually a sheet off the desk; you know, 'from the desk of . . .') and decide if it is time to make the play. For Friday we had written down support levels for several stocks, e.g., GLW, JNPR, NEWP, MANU, EXTR, and knew where we wanted to pick them up. We saw an early bounce in some and tested the waters with a few positions, looking to leg in if the moves continued on up. They were looking good until the end of the session when everything tanked. We were stopped out on some, and others held on pretty well. Does not always work, but we were willing to take the positions based on what we saw.
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