Monday, February 23, 2009


is not a virtue of mine or most traders. As an example, I got into KSS (Kohl's corporation) April puts back on 1/26/09. I have been in this trade less than 1 month and I am sitting on 40% gains, but it feels like it is taking forever for this stock to do what I expect/want. I have also been impatiently waiting for gold stocks to slide into a routine steep correction for a while now, but they have been holding strong for an entire 3-4 weeks while I wait.

Knowing how and when to "sit on your hands" or "sit tight and be right" is a hard lesson to learn and must be balanced by the need to abandon an unsuccessful trade when wrong. I know many have expressed to me their anxiety waiting for the gold price to correct, as everyone is afraid of missing "the big move." Trust me, the patience is worth it. In trading, as in life, some big opportunities will pass you by. However, if you wait for the fat, slow pitches before swinging for the fences, the wait is generally worth it.

I couldn't resist the opportunity today and added some more Autozone (AZO) June puts to my collection at the open. I also dumped my PAAS silver miner puts today at a small profit (not as big as I had hoped...). We are getting closer to a bottom and I don't think we will go much more than 10% below the November lows in the S&P 500 before a big rally occurs. Remember my 3 "triggers" that must occur before I start thinking about going long in anything besides puts:

1. RSI near the 30 range on a daily chart of the S&P 500 (check - this one's done)
2. Equity put to call ratio ($CPCE) at/greater than 1.10 on a daily chart (not there yet)
3. $VIX greater than 55 (not there yet)

Don't chase silver or gold here from the long side and don't be a brave bull too soon in general equities. Wait for a fat, slow, sweet pitch. We should have a nice capitulation bottom before it's all over, and I'm guessing it will occur before the week is over. Don't worry about missing the bull train, worry about getting flattened by the bear steamroller. If you are short, it's time to start setting profit goals and then either closing trades once they reach the objective or using stop losses to protect profits.

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