Morning View – Guest Post

Good morning all. It is an honor and pleasure to repost an opening muse by one of our long standing Tickerville chat room members, Ob1. I couldn’t add a thing if I wanted to.

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Most ski resorts have a variety of runs from green circles to double black diamonds, determined by the slope and difficulty so that skiers know in advance what they’re getting into. The stock market is no different, as there are many different stocks and vehicles that can be traded depending upon ones comfort level and risk tolerance. Personally, being a double green circle skier, I think the ski lifts should be rated as well. I mean seriously, in theme parks, the rides are rated based on their thrill level. Why shouldn’t the lifts be rated as well. They are not all the same. They could use criteria such as, the difficulty in getting seated, the size of the chair based on the number of skiers, the height achieved relative to sea level, the difficulty in achieving dismount, and the steepness of the slope that needs to be immediately navigated, assuming that the dismount was successful.

With stock trading, preservation of capital should be a trader’s primary concern. Just like with skiing where preservation of body parts should rule supremely. On a recent ski trip, the person working the ski rental counter understood that concept completely. I had some difficulty with the exchange of skis and poles from his hand to mine. The worker then politely asked, “Would you like a helmet?”

Like in skiing, the individual goals that a trader has is relative to what they are willing to risk. Some skiers rate themselves on how quickly and smoothly they get down the slope. Other skiers like myself, just want to get down the slope with my legs and arms still intact. And if I can have less than six chair lift accidents in a day, I call it a bonus. If I achieve my goals, I consider myself just as successful as the seasoned skier who just set a personal best skiing a difficult slope.

Now every now and then, I’ll get bold and try something outside of my capability. In skiing, that means trying anything other than green. I usually end up battered, bruised, and dazed, wondering what just happened to me. Then after picking up the pieces, I vow to never listen to that daring voice in my head again. The same can be said of stocks at times, when I venture out into the thin and super high beta world. Once the pieces of my account are reassembled, I’ll go back to trading in my sweet spot.

Fortunately with stock trading we don’t have to trade everything, just like in skiing where I can avoid the black diamonds. Somebody that trades low beta stocks can be just as successful as someone that trades super high momentum names. I tend to take the middle ground, preferring higher beta stocks, but only liking the ones that trade with some volume. Nobody has to be a jack of all trades. What are your preferences?

What I found most interesting this weekend, was the large number of stocks that have suffered corrections, and have pulled back to support areas while the indexes are in the nose bleed section. I really would prefer that the indexes to correct as well, allowing the really strong stocks to present themselves. Of course, I am not the only one that wants that, so it is not likely to occur in any predictable manor. Based on the charts themselves, we are either going to see these stocks break up in continuation patterns or we are going to get a large drop in the number of stocks trading above their 40-day ma. I am prepared for either scenario.

Good luck.