Emotion Leads to Impulse Trading

I couldn't pass on this letter! I shelved my intro when this e-mail came in. It speaks volumes about the struggle we all have while playing the market.

I've been watching your website split predictions for several (2 or 3) months now. While I've not used your predictions in my previous trades until Friday June 30,2000, I'm amazed at your success ratio. My success ratio has been 90% I lose and 10% I win. Everyone tells me I sell too early. It's true. So far I've missed $8500 on two times making plays on VA LINUX and selling 1 day too early both times. My heart beats a mile a minute when my stock goes down and I start getting depressed. Fortunately for everyone in the world it always goes up again. Unfortunately for me, when it does, I miss the profits. Today, I bought and sold IWOV 3 times. I couldn't believe a stock could move that much in 1 day. My last buy I bought 85 shares at 121.38. (I got greedy...serves me right I guess). When it started dropping around lunchtime and of course right after I bought it again, I thought I'd hold it because of my anticipation of latter day volume. I held only to laugh and cry at the same time when it poured down like water spilling down to 109. Once again continuing my impeccable losing streak! (Ha!...that was a joke....my wife says I'm not funny, I might add!) Jay

That's priceless! Believe me, I'm laughing with you, not at you Jay.

I think there are two basic types of traders. The first type falls in love with a stock and holds a losing position while rationalizing that the market is wrong and will come to its senses. The other type which you described and I sometimes fall into that category with my own personal trading, is a great stock picker but quick to exit a position with a modest gain, often leaving huge profits on the table.

I'll tell you what has helped me. Reduce the size of your position. Spread out your trades; don't bet the house on one large trade. Even if you don't make as much on your individual winners, at least you won't panic into locking in losses just when the stock has found support and is ready to turn up again. You will also be more comfortable in letting your winners continue to win. Once you get comfortable with your skills, then consider increasing your bets.

This is one of those twelve step processes, I think. I'm still working on the other 11 steps. Maybe we could hold a group session…

We have some interesting charting questions this week, so to the charts we go! As usual, send an email with stocks you would like to see diagrammed, technical analysis questions, or comments to traders@splittrader.com

What does your analysis of RFMD's chart say about near term downside as well as potential upside? Thank you

RF Micro has had a tough go since June 14th, the day following their presentation at the CIBC conference. Rumors floated that the company did not present well. There wasn't any bad news, but in the market, perception is reality. Maybe RFMD has finally found support and is ready to move up with July 18th earnings approaching.

I have been receiving your email newsletter for a while now and enjoy it very much! Where can I find information about upcoming stockholders' meetings for companies where increasing the number of shares is a topic on the agenda? Is there a website where I can find out this information? Rachael

Sure is. Check out a website called Splittrader.com. They have this really cool SEC filings section that shows when the filing was made and you can also search to find upcoming meetings. Even better, the list shows filings for secondary stock offerings, which can impact the stock price.

That was shameless wasn't it!

Could you please do a technical analysis for stock with the symbol "SDLI"? Please comment on the support and overhead resistance. Please keep in mind I am a novice in the subject of technical analysis. Thank you ! Paul

SDLI, SDLI… where have I heard of that? Oh yeah, SDLI, the monster fiber optics stock that slices through all-time highs like butter. Now I remember!

These huge momentum stocks really react to upgrades. SDLI received a price target of $322 from ABN AMRO on June 2nd, while trading at $260. The stock promptly set course for that number and topped out at $315 on the 19th. Now there are rumors circulating that the Company will announce a split. Ya think? I bet so. Both of the previous splits followed a board meeting. We've been unable to confirm the date of the next one, but it could be anytime before July 19th earnings.

Wow what a great column! Take a look at JNPR please - support resistance levels so I can set my trailing stop - Thanx, Amy

Who's afraid of big bad Cisco? Not Juniper! The company competes in the same market and JNPR recently announced a joint marketing agreement with Nortel Networks. July 13th earnings are right around the corner - that could provide some interest for the stock.

That's it for this week - Have a Happy and Safe Independence Day!

Steve Pekarek

DISCLAIMER:
This column is an information service only. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The Ask the Trader picks are not to be considered a recommendation of any stock or option but an information resource to aid the investor in making an informed decision regarding stock trading. It is possible at this or some subsequent date, the editor and staff of The SplitTrader.com Newsletter may own, buy or sell securities presented. All investors should consult a qualified professional before trading in any security. The information provided has been obtained from sources deemed reliable, but is not guaranteed as to its accuracy.