Poker, Trading and Making Adjustments

In my Thursday report to members, I talk about the current market, making adjustments and poker:

Before we begin, let me compare what’s going on now to poker. In Texas Hold’em, the best hand pre-flop is pocket Aces. Most players try to get as much money into the pot as they can when they are dealt this hand. While this is a great hand before the flop (the three community cards that are dealt to everybody), a flop that leaves open the possibility for a flush, straight or trips (hands that beat pocket aces) can spell disaster. Great players can lay down pocket aces or control the betting in order to limit risk. Amatuers can’t adjust and end up losing their bankroll. The ability to adjust the game plan as more information presents itself is what seperates the men from the boys.

With the poker analogy in mind, let’s analyze what’s going on with the market. Originally I planned to start shorting as low as $87.50. At his level I expected stochastics to reach 90, which would give an extremely overbought reading. However, we’ve had enough consolidation to drop stochastics enough that the $87 price level will probably only give us a mild overbought reading. Thus, it’s time to adjust.

I am raising my short entry level to $89-91. If stochastics are still not near 90, I’ll raise the price entry to $93-95. These price level correspond with the resistance lines on the chart below.

I am not looking to enter at these levels. Basically, we are at a level that is too overbought to enter, yet not overbought enough to enter short.

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