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Trade Alert: Scaling in amidst the panic

August 24, 2015 by Cody Willard

Remember just 32 days ago, I wrote this:

We have a lot of stocks up big today, which has been a recurring theme for our portfolio during earnings season so far. Many of our biggest positions are at or near all-time highs. If you haven’t done any trimming, consider doing so. Maybe 10-20% of some of these biggest winners or about that same amount of some of your most recent big winners.

It’s easy to get carried away in the momentum and to start feeling invincible when so many of our stocks are so far outpacing the broader markets which have been struggling all year. In the Trading With Cody Chat Room today, there are a lot of comments like these:

  • $SPLK breaking out.
  • LOTS OF THINGS WORKING WELL we have had great timely trims and great timely buys overall YTD.
  • Good trade on AMBA
  • YTD has been nice
  • sounds like your YTD performance is outpacing that of the S&P!

Just a reminder that it’s better to sell when you can, not when you have to. And on that note, I also noticed that my ratings for most of our long positions crept lower this month, as most of our stocks ran higher.

Let me rephrase that post according to today’s reality:

We have a lot of stocks DOWN big today. Many of our biggest positions ARE BACK DOWN to levels they haven’t seen in many months. If you haven’t done any BUYING, consider doing so. Maybe NIBBLE ON 10-20% of WHAT YOU CONSIDER A FULL-SIZED POSITION.

It’s easy to get carried away in the momentum and to start feeling THE PANIC when so many stocks AND the broader markets ARE BASICALLY CRASHING. In the Trading With Cody Chat Room today, there are a lot of comments like these:

  • Do you consider going 100% cash yourself?
  • I clearly understand the desire to SELL IT ALL.
  • I am considering to sell all shares and go 100% cash.

Just a reminder that it’s better TO BUY INTO PANIC, NOT SELL INTO PANICS. And on that note, I WILL TELL YOU that my ratings for most of our long positions JUMPED HIGHER IN THE LAST WEEK, as most of our stocks HAVE COME DOWN.

It’s been said that stocks go up like an escalator and they go down like an elevator. So it goes. And while most money managers were bullish and getting longer when the markets were at all-time highs and/or rangebound near all-time highs, the same folks are now panicking and selling and turning bearish.

If you trimmed when stocks were higher, if you follow the playbook, you’re not sick to your stomach today — you’re looking around and starting to pick up some shares. Don’t draw a line in the sand, don’t try to nail the bottom. Just scale into some more long exposure while others are panicking.

That’s exactly what I’ll be doing this morning as I nibble on some of my highest rated stocks. I’m not going to go all-in and I’m not going to load up on call options (yet?), but I am going to scale into more long exposure while others are panicking.

So, my daughter Amaris has a doctor’s appointment this morning and I’ll be there with her early and then I’ll be back before the midway point of the trading day. This morning, I’ll be nibbling on some:

AMBA.

AAPL.

GOOG.

FSLR.

EZCH.

Keep your heads up, keep your cool and stay vigilant. We have a playbook for this. I’ll be back with another post in a bit.

Related posts:

Trade Alert - Buying back some puts and some true fairy tales
Trade Alert: Investing in Under Armour UA
Trade Alert: Time to cover some of our VRX homerun short
Trade Alert: Insights, answers and scaling into more of one tech stock
Trade Alert: Trimming some 70% gains in PI into the hype
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Filed Under: Trade Alert

Disclosure: At the time of publication, the firm in which Willard is a partner and/or Mr. Willard had positions in some of the stocks mentioned above although positions can change at any time and without notice.

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This does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or cryptocurrency or token any other product or service by Cody Willard or any other third party. Furthermore, nothing in this is intended to provide tax, legal, or investment advice and nothing in this should be construed as a recommendation to buy, sell, or hold any investment or security or cryptocurrency or token or to engage in any investment strategy or transaction. You are solely responsible for determining whether any investment, investment strategy, security or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your business advisor, attorney, or tax and accounting advisor regarding your specific business, legal or tax situation.

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