Oct
08
2008

  Glad My Trade Didn't Execute

I was following the market this morning and until around 1pm. There was a flag pattern developing, and I always find those rather exciting to watch, since at the end there is usually a breakout either up or down, but there's no telling exactly when it will happen or what direction it will go.

I guessed that the breakout would be up, and if I bought some DIA at $92 I might be able to make a quick intraday profit of $10/share. I was going to buy the shares, then place a sell order to be activated when the price hit $102, so I wouldn't have to sit around the computer all day since I had to go to Ikea to get the kitchen cabinets.

Well, I was about 9 minutes too late to catch $92, so I revised the order to $92.50 then $93.00 I took a shower but the price was still in the $94s when I was done, and I debated buying at that level, but decided against it and canceled my order. It would have been a riskier trade at $94 than at $92, and while I was willing to take a chance at $93 I couldn't justify $94. So I went to Ikea empty-handed, figuring I'd miss today's rally and that's that.

Well la-di-da, who'd a thunk the rally attempt would have failed so miserably? The DIA got up to $96.39, which while a decent increase from the open, was a far cry from the $102 I'd expect from a successful rally. What's more, although stocks did rally for about an hour and a half, from about 1:50pm to 2:20pm, they gave up their gains for the rest of the session and finished the day not only lower than yesterday's close, but lower than yesterday's low.

I didn't see the chart until I got home around 6pm. I'm glad I canceled my order before I left, otherwise it would have executed later in the day during the downslide, and that's the last thing I would have wanted. Buy on the way UP, not on the way down.

I don't yet have a feel for what the market will do tomorrow. The Fed has been stepping in and changing the game so the market isn't particularly free at this point. The short-selling ban is lifted starting at midnight tonight, so I'm very curious to see what effect that will have. The lack of short-selling certainly hasn't kept the financial stocks from dropping. I own SKF, whose performance is based on the inverse of the financials, and issues of new shares was suspended when short-selling was announced. But I've held it, and it's been performing well for me. I am hopeful it will go through the roof tomorrow when short-selling resumes.

Although I would normally hope for a dramatic plunge in the share prices of the financial stocks, since that would benefit me most, I actually would prefer it to be significant, but not too alarming. Why? Because I seriously think that the SEC might pull a Russia and shut down the stock market if prices drop too precipitously. They've intervened in our supposedly "free" markets so much already in the past month, I think it's entirely within the realm of possibility.