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Late last year I talked about ‘sticking to your guns’ when you believe in your strategy – despite there maybe being some headwinds. This of course assumes that your strategy was well founded in the first place and has been successfully and repeatedly tested. This is all part of having a proven methodology which you use over and over again.
In that editorial I was talking about CFDs in particular as many investors are quick to sell when the going gets rough when they otherwise would have made some great money had they ridden the wave that had attracted them into the trade in the first place.
The rest is history. If you stuck with your trades over the holiday period you will have made some great returns.
Now I would like to talk about the other end of the deal – when to get out.
I believe there is still short term money to be made in this market. BUT soon we will reach a point where the returns become marginal AND risk becomes higher. And this is exactly what we saw in late 2007. Yes another mini bubble is in the making. For me I will be exiting in the coming weeks. And I know that I can buy in cheaper anyway in the months ahead.
Take a look at my chart:
click to enlarge
You can see we have almost regained 50% of the fall from November 2007. I think the market can go beyond 5000 and even to maybe about 5400 – which happens to be a useful Fibonacci number.
After that expect little gain and maybe sleepless nights. After that? Maybe some sideways movement until a few ‘nervous Nellie’s’ – sorry ‘nervous Neville’s’ rush to the exit and the stampede happens. All over again.
‘You got to know when to hold ‘em, know when to fold ‘em, know when to walk away, know when to run….’
Enjoy the ride
Tom Scollon
Chief Analyst
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