Wednesday, October 26, 2005


I wasn't too satisfied with my assessment of the markets today. First, I bought the QQQQ, which is very uncharacteristic of me. The reason why I don't like buying indexes is because I believe I am buying a lot of bad stocks when I buy the index. 50% of the stock movement comes from the overall market, and 50% comes from the stock itself.

I believe one can maximize the probability that a stock will go up if they choose the "strongest" stock. Although "strong" is a very subjective term, it could mean a fundamental advantage within the company, relative strength, or an interesting technical pattern the stock may be forming. Picking "strong" stocks increases the probabiliy that a stock will go up even when the market goes down.

This morning, I saw a perfect opportunity in GOOG when it was trading between 349 and 350. For some reason, I didn't take it and bought the QQQQ instead. Perhaps a reason is because I am too tired to think properly at 6:30 am when the market opens.

To address this issue, I am going to prepare more the night before. Right now, I am still eyeing XLE (although its an idex, all energy stocks move the same, so there isn't much advantage to picking an individual energy, the implied volatility is lower for options). I sold my XLE position today for a small gain, and I think it will drop below 47.5. Since it previously bounced off a major bottom trendline, I believe it will uptrend for a while, so I will be looking to buy XLE again pretty soon.


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