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    Tuesday, May 6, 2008

    Morning update



    A timely headline on Bloomberg this morning, states that Fannie Mae's (FNM) credit losses will be worse next year than 2008! I've read on other blogs that some poor souls were long this, along with some other "bargain" financial stocks. This is one of the easiest mistakes to avoid in trading, by just staying with the long term trend (ex. 200 MA). It's not a complicated calculation, the trader simply steps back and looks at the chart's slope of the 200 MA. Trending up, it's a long candidate only, and vice versa. It does NOT mean we are holding forever, it means we are either flat or long, but not betting against that trend, ever. This simple method has another added benefit I've written about. That is, when "surprise" headlines come out, you'll find you are the benefactor more often than not. This news will be good for my SKF position (short financial stocks), and should spill over to the general market a bit also (good for my real estate short). We can't know when or what the headlines will be, but we can put the odds in our favor by realizing that truly good news from the banks and brokers is a long, long way off.

    Regarding today's plan, I'm still on the hunt to add to my winners. As usual, I won't chase or get involved before 10 am. At this stage of the trade, it's especially important to avoid distractions, opinions, and advice. The "analysis" and decision to take the trade has already been made, so put it behind you. The only thing that warrants our focus and energy is trading through the idea properly. I do not expect the trading to continue working in a straight line to victory (profits), but so far, so good.


    Read these: Fannie Mae



     

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