I’m getting the feeling that some of you are in over your heads when it comes to the markets. Playing the stock markets is nothing more than psychological warfare. It’s all about emotions. When you put money and then leverage on the playing field many investors loose sight of the bigger picture. As soon as the markets don’t go their way they start thinking with emotions instead of what discipline they use to trade.
The HUI is just starting its fourth week in this congestion zone between 236 and 250 with many reversals taking place in that tight trading range. We don’t know 100% for sure if this is a consolidation pattern or some type of topping pattern that has been building out. Our discipline, Chartology, strongly suggests this is a consolidation pattern forming but there are no guarantees this is the case until we get confirmation one way or the other.
If this congestion area is wearing you out then you are way too leveraged and need to cut back on your position size. So far this has been just a mild 14 point trading range on the HUI that one should be able to cope with without getting all emotional wondering when the pain is going to end. Folks, this trading range is so small it doesn’t even show up on a weekly chart yet. How you’re coping with this little trading range should tell you of your own psychological makeup.
If you are having a hard time dealing with this trading range you really need to think about cutting the size of your positions so that you can think with a clear mind. If the HUI trades down to its 50 dma will you be able to hold on? If the answer is no then you really need to reduce your position size as soon as possible. Every trade doesn’t have to be a home run like so many think.
We have three different portfolios ranging from the Model Portfolio which is conservative. The Junior Portfolio which is a little more speculative and then the Kamikaze Portfolio which is the highest degree of speculation. The Kamikaze Portfolio equals high risk for high reward. Make sure you understand what that means. HIGH RISK – HIGH REWARD. Most investors don’t have the emotional capability to play in the Kamikaze Portfolio. Believe me there is nothing wrong with that. The Juniors are offering us a good lower risk and high reward opportunity if one can hang on through the draw downs. Then there is the Model Portfolio that will do very well if we are indeed entering the second leg of this secular bull market.
So, be honest with yourself and decide which is the best way for you, personally, to invest your hard earned money. Keep in mind this isn’t a child’s game we are play here. We are going up against the brightest minds in the world that want your money. They could care less if you loose every last penny to them. For them it’s like taking candy from a baby. The inexperienced get eaten alive before they even know what hit them. So please keep your leverage to a minimum and trade according to you own psychological makeup so you can stay in the game long enough to learn something. All the best…Rambis