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Thursday, October 23, 2008

Stock market bottom price prediction october 2008 (third visit to the bottom)

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After successfully calling the stock market bottom on october 10, october 16, it is now time to call the stock market for a third time:

2:14PM: with NDX at 1187, we are starting to scale in on long side of NDX.

Additions after the market close:

After we posted the above market call, the blogging platform used for this blog was temporarily out of service. Therefore we could not post the completion of the entry, and also the exit.

The exit was done at market close with NDX at 1239. The average entry price was around 1184, therefore, the profits was around 55 NDX points (which is not a small feat especially for only less than two hours of market exposure).

The profits represent 4.5% return on a major market index.

A reader asked if we have exited the long position. You know now the answer.

A question that the reader did however ask, and which we think is important, is the reason why we did take the profits. There are in fact multiple reasons:

1. While we think we are in the area of a market bottom, there is a chance that the market might sell off before a reversal to the upside. However this selloff is not necessary for a rally to emerge.

2. The reversal of the down trend of the last few days should be confirm when price breaks through the high price of the previous day. Tomorrow Friday is imporant to watch. We will see whether the high of Thursday (today october 23, 2008)will be broken. In order for this to be a strong rally (if any), one would want to see a break of yesterday's high during the morning session. There is a reason for this, and we will discuss it another time as such discussion is longer than what we can cover in this post.

3. Now what if the high of previous (today Thursday) is broken tomorrow (Friday). We might still have a retreat to the 1230 to 1240 area sometime in the middle of the morning, before a secong leg of the rally develops towards the end of the afternoon.

4. If the market falls towards the morning, we will be watching the testing of today's bottom. We may re-enter close to the lows of today or soon after the low is broken if any.

In sum, if you look at all scenarios, it was wise to take the profits.

5. The last point we did not discuss now is related to retirement accounts. A retirement account is for longer term and to hedge it it is important to take the profits from the brokerage account which is a short term trading account.

To your profits!

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Happy trading,


Anonymous Anonymous said...

Hahaha. Blogspot went down and you couldn't write about the exit.


Remember this call for "THE BOTTOM"?!

October 24, 2008 at 11:09 AM  

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