WHEN SHOULD YOU TAKE A LOSS ON A STOCK TRADE

in this week's episode of the stock scores market minutes we're going to talk about when you should take a loss on a stock trade it depends a lot on when you buy and i'll show you a simple method to know when to get out plus i'll do my regular weekly market analysis we'll look at the day trade of the week on hut and run a market scan in search of opportunity [Music] so before we get started with the normal content for this week i want to let you know that i have some free educational webinars coming up this week tuesday wednesday and saturday you can see the topics on screen tuesday i will look at investing wednesday i will look at day trading and then on saturday talk a little bit about the different training options that we have at stock scores to register for those simply go to the stock scores website click on the trader training menu and go down to upcoming events and the links to register are there alright so when should we take a loss on a stock trade well there's some simple concepts that we need to understand and the first is that the price you see in the market is the market's perception of what fundamental value is at any one point in time so if a stock you know goes down to eight dollars and then starts going up again what the market's really saying is that eight dollars is a minimum for what people will accept for that stock based on the fundamentals of the business or at least the perception of the fundamentals so what we do when we are trying to figure out where to take a loss is look for those floor prices those places where price stopped going down and started to go up we call that support but visually on a chart it's the little valleys that we see in the past in the recent past and those little valleys form support and if price were to go down through that floor it implies that there is some negative information that justifies taking a lower price and if that is the case then we may see that stock go even lower so breaks through support are very important let's take a look at a chart here just to understand this better so we have here support right there okay the stock went down and then it started to go up stock went down started to go up and this particular support zone was hit twice now this is a short term chart 30 day 30 minutes if you had bought camber energy right here on the breakout which was a decent buy signal for a swing trade then you would say if it falls down through that support i'm going to get out of the trade now along the way there's new support zones there's this one and then there's this one i call these inflection points it's where price stops going down and starts going up and you can see inflection point after inflection point so at this point right there we have broken down through that inflection point so if you had bought at the highs heaven forbid and it went down through that inflection point floor then you know it's time to get out if you bought here and the stock had rolled over and actually gone down through support instead of gone up then you would know it is time to sell and so that's really the key is always sell stocks when they break down through support the time to take a loss is when they break down through support and usually it's that breakthrough support that is the cheapest place to take the loss it's never easy to take loss on a trade but if you don't you might end up holding that stock a lot longer taking a much bigger loss that ends up meaning that your portfolio is really harmed in two ways one you're taking the financial loss that is big but also you're tying up your capital for way too long all right let's get in now to the analysis of the u.s markets starting us off with the s p 500 which had a decent week this past week we did a number of good things technically first of all that downward trend line we had that confirmation break on thursday now of course last week we tried to break and then we pulled back but what we did is we built some rising bottoms so we switched from pessimism which is here the falling tops to optimism here with rising bottoms and the break up through that downward trend line from this little pennant pattern was a positive i don't think the short-term market is out of the woods because it still has lots of resistance to work its way through but things are definitely looking better and on the long term weekly chart we can now define a new upward trend line based on that pullback and we've broken what's called a flag pattern there this should lead to a resumption of the upward trend if we were to now fall down through that support that inflection point well that would be a negative so the current call it stop loss point on the s p is right here i don't know what that number is exactly probably around 425 or so and that is new support all right let's move on to the nasdaq market it also rebounded this week we've had you know roughly sorry we've had roughly uh six weeks of weakness into there and we built a rising bottom and we've broken the cycle of pessimism that should lead to the market moving higher on to the iwm which had a little bit of strength this week as well but it was never as weak as the large cap stocks or as the tech stocks it didn't have as much to lose because it didn't make the same kind of gains the small caps have been going sideways for most of this year well this week we broke this little pennant pattern on thursday tried to show some strength friday morning and kind of fizzled out and that's because of the resistance zones that this market is going to have to break through so i think it's um a decent looking market i would call it neutral but if it can break out through that ceiling around 233 then we may get a hot speculative market again like we had late last year and into early this year all right now on to the canadian markets and the tsx managed to make some really good gains this week on the strength of oil primarily oil was strong we've talked about that the last few weeks you can see the break of the downward trend um actually the previous week and then that just materialized into a nice resurgence in the canadian market again driven by oil and so the long-term chart for the canadian market is strong because we are breaking to new highs we are not like the situation on the s p where it's still below the all-time highs we never had as much weakness and now we're getting that strength which takes the canadian market to new highs it is pretty selective in what sectors of the market are strong obviously the energy sector is strong and that contributes to you know the banking sector and some of those being okay but other sectors are still pretty quiet tsx venture has managed to break that cycle of falling tops and this is what's called a falling wedge pattern the bottoms were not falling as quickly as the tops and then this week we broke that so we finally have a little bit of enthusiasm and it's really timely because of course the market the the speculative market in particular tends to be strong from october until may well here we are mid-october and just like it's looking at the calendar those junior stocks the micro cap small cap stocks in canada starting to show a little bit of life so you may see some action in the penny stocks in canada on the currency side us dollar has uh given a buy signal a few weeks ago and it continues to build rising bottom slowly and i think the us dollar more likely to go higher than lower and on the bitcoin market of course we broke that downward trend line talked about that last week and we got follow through this week i think bitcoin's probably headed back toward the highs which is good if you're into the cryptocurrency ethereum kind of lagging a little bit but also didn't lose as much as bitcoin did and so it's building what we call a pennant pattern if it can break out of this then it may continue into an upward trend so things generally looking a lot better in crypto on the commodity side uh gold had some strength i believe on wednesday kind of fizzled out before the end of the week and we have not managed to break any downward trends basically we are holding support but not showing a great deal of excitement yet just maybe not as bad as it was a little over a month ago on the uh pardon me on the oil side you can see that oil moving to new highs and that is good for the canadian market in particular because there is such a heavy concentration of those energy names but what you want to be careful with here is that many oil stocks are well into upward trends already so you want to make sure if you're going to buy some of those that you're looking at stocks that are breaking from low volatility that are not well into an upward trend already you want to chase stocks you want to buy them when they start to move out of sideways trading patterns all right so then finally the fear chart fear is at a a real low here and it really demonstrates why you only want to use things like the vxx or uv xy as very short-term vehicles you can swing trade them day trade them but long-term hold of these things is not a good idea because they decay in value over time uh because of the futures that they're based upon all right so my ratings then uh back to bullish long term on u.s and canadian stocks neutral short term on the u.s bullish short term on canadian neutral on both time frames for gold and bullish on both time frames for oil we have more strength in stocks this week and that's perhaps indicating that we are starting up that stock trading season that i've talked about a lot recently it traditionally runs from october till may the quantity of good trades is still kind of low on day trades there's lots but swing position a little low still but it is getting better the charts are improving and i think that sets up for a good run into the winter and into the spring precious metals have shown some life this past week but they're really not breaking pessimism yet so don't get too optimistic there yet oil is strong and fear is low all right now we're going to run over to the day trade of the week and as i said the day trading market's been pretty good every day there are a number of stocks that are quite hot that are trading with abnormal volume and it's really those that you want to focus on i call those super alpha stocks they have extremely high volume extremely abnormal volume and as i said every day there's three to five friday was a little bit less and friday this was one of those stocks it is related to cryptocurrency which of course is a sector that is doing well the last couple of weeks and you can see the action candle on the open strong volume strong price action if you've been watching this for any length of time these videos each week you'll know that i'm always looking for that these action candles which is my own indicator i'll talk more about action candles uh in the webinar that i do on wednesday which will be focused on day trading we'll go into what those are and why they work and that sort of thing so be sure to sign up all those webinars are free anyway in this particular trade for 100 of risk you would buy 550 shares you want to buy 200 of risk you buy 1100 shares for every 550 shares required six thousand one hundred and sixteen dollars of capital but this stock is marginable because it is over three dollars so you only have to put up one third of the capital or about two thousand forty dollars by the end of the day the stock was up six times its risk so for every one hundred dollars of risk you got a six hundred dollar gain that's a twenty nine point four percent return on the margin that you uh could use on the capital require all right let's jump into the stock scores market scan now and see if we can find any of those longer term trades so to do that we go into the market scan and we select i'm going to run the abnormal brakes us scan this week and let's just see if there's any stocks that are breaking from predictive patterns now the great thing about this tool is we went from roughly 7 000 stocks that are listed on the u.s market and took it down to 35 that were showing some life here's grnq it was a good day trader on friday i don't know that it's a great longer term trade yet because it is facing resistance here at a dollar not really building any optimism yet so it was a short-term vehicle a lot of these will be that way because they are breaking up into pessimism you can see so many of the stocks that are showing abnormal action are breaking up into pessimism now they can be good short-term trades day trades maybe even swing trades because the pessimism doesn't really matter too much outside of that day but when you look at a longer term hold a little bit more questionable now llnw a decent chart here it built a little bit of a rising bottom it's broken the downward trend volume was a little higher than normal price action abnormal it has issues it's going to find resistance at three and then at you know 330 so i wouldn't give this more than a six out of ten which means i think it has a 60 chance of being a good trade here we have bttr also showing a little bit of life in terms of abnormal price action on friday but lacking the abnormal volume that i like to see so i wouldn't say that one's great it's better than most but not great this stock breaking the downward trend line but no real rising bottoms no build of optimism yet here's a stock that has been doing really well and it really exemplifies what we want to see when we're doing these market scans we want to see that build of optimism the breakthrough resistance and right there that's when it starts to show life start to behave abnormally you know that was under two dollars and fifty cents today or friday it hit six dollars and so you can see that using this formula of looking for abnormal price action abnormal volume out of the predictive pattern out of an optimistic pattern this particular pattern is called an ascending triangle i'll probably talk about those a little bit in the webinars this week tuesday wednesday and saturday so we'll leave it at that and just as a quick aside if you want to register for those webinars go to the upcoming events area under the trader training page and you can then register right here for free you just click on the register online button and you can be registered so i'll leave the discussion at that and we will look forward to next week and of course the webinars tuesday wednesday and saturday hope to see many of you there i promise it will be informative and educational but if you cannot make it then we'll see you next saturday or sunday with our weekly market minutes video hope you've enjoyed it trade well

Channel: Stockscores

Views: 1,410

Rating: 5 out of 5

Keywords: stock, trading, day trading basics, stock investing for beginners, stock market correction, how to make money in stocks, day trading for beginners, stock market analysis, stock investing basics

Id: ZR1zPnmFMQQ

Length: 15min 49sec (949 seconds)

Published: Sun Oct 17 2021