What "might" work is not the same as what "must" work. Let’s look at some of..
Discussed in this article: Alpha Natural Resources Inc. ( $ANR )
Let’s look at coal today. We’ve got a market that’s actually working really well. There’s a lot of stuff that’s working and we’ve really seen that just over the last year. The last few weeks you would have expected a breakdown below this line, but instead we got a rally up through it then a pull back to it, and now we move on. So if you look at coal and this was one of those that I was thinking back then, “You know it looks like we’ve got a nice little channel here so the next time we get a pullback we’re going to look for a bounce and then we’ll take this for a ride.” Now, that was before you knew that the market was moving higher so this looked like a potential rotation.
My point here is, might work does not equal must work, and you’ve got to understand, you’ve got to acknowledge when your analysis is wrong. If you are always at least open to being corrected, I’ll say looking for why you’re wrong, always trying to disprove your thesis, you will ultimately find that your able to admit that you’re wrong sooner, meaning that you’re going to lose less money, because typically we lose money when were wrong, right?
So here’s the point: as the market moved higher we can look and see Alpha Natural Resources ( NYSE:ANR ) pulling back here, as the stock moved down we’ve got the 50 and the 200-day moving average right down there, we’re probably going to get a little bounce here maybe just a perpetuation of this breakout, but we should get a bounce here and that will have turned out to be a good buy point.
Well, that turned out not to be the case; I mean it did for about 20 minutes during the day here last Friday, but now we’ve got to break down below these two key moving averages. We’ll look at others, Walter Energy ( NYSE:WLT ), this broke down pretty, I’m not going to say decisively, but let’s just say you’ve got to be a real dyed-in-the-wool coal bull to think that this breakdown below the 50-day moving average is a buying opportunity or is quote “wrong,” it’s not. Ultimately I guess these stocks could go up although the way Washington and the EPA are these days, that’s absolutely not guaranteed.
So then we look at Peabody Energy ( NYSE:BTU ), same deal, we got a pullback and then a break down through the 50 and the 200-day moving average. So here’s my point, you’ve got money, that is your stock and trade, pardon the pun; your money is what you make money on and so you’ve got it deployed in any number of ways, whether it’s Apple or Priceline, United Technologies you name it, you’re buying stocks, you own stocks, and what you want to be doing is you want to be in stocks that are working.
If they might work, then that’s fine to go ahead and take a position, but you just don’t want to you overstay your welcome when you learn that you’re actually not welcome at all. If you’re doing that then you’re essentially indicating or revealing your stubbornness, stubbornness does absolutely not work in trading so I want you to avoid being stubborn. If you see a sector that’s not working than likely your stock is also not working. That’s really the case here with coal so I’d want to stay away from it. As long as other things are working stick with stuff up here in the winner’s circle as opposed to down here in the penalty box.