If you’re following “Main Street beats Wall Street” just to watch and see what I do, this will be a very disappointing post. If you are following to learn and have hopes in becoming a trader, this is a very important post.
I received an email from a “Main Street beats Wall Street” reader last week and he was complimenting me on the great year I’m having. I responded by saying:
“You are right, I’m having a great year!” I continued, “I’m thinking about getting out of most positions and lying low this week. I need to cool off a bit and I’d rather do it with no positions.”
Readers, did you read my post of May 10? It’s titled “Where is U.S. Steel Going?” Read it. It’s a post giving my thoughts on where U.S. Steel (X) is heading using the candlestick chart with the 50 Day Moving Average line. In that post I say:
“Picking direction is the toughest thing to do in the stock market. Any day news can come out on a stock or a sector and throw a monkey wrench into the entire Technical analysis. If no news comes out and the market move in a normal manner, I think U.S. Steel is heading up.”
Well, news came out yesterday. There was an article on Bloomberg’s site with the headline, Another Wave of Cheap Imports Predicted. The article went on to say China is flooding the world with cheap steel and much is headed to the United States. “That’s as surging U.S. steel prices and falling Chinese prices boost the appeal of targeting the U.S. market even after import tariffs were introduced in recent months for some products” the article said. “A boat load of imports are likely on the way,” Gordon Johnson, an analyst at Axiom Capital Research said in a research note Thursday.
If you’ve been following you know I own 10,000 shares of X. This is not good! It would have been nice if I followed my own advice in my email because X is down big in the last few days. I am bringing in a nice premium this week on Calls I sold on this stock but not enough to make up for the stock decline. The premium is $5000.
This morning I had to bring my wife to physical therapy. I didn’t want to be away from my computer because of the possibility of further decline so I put a sell order on 5000 shares at $14.65. You guessed it! The stock continued down and my order was filled. I got in my shares at $17.87 and sold at $14.65. This is bad! But don’t cry for me Argentina! I’ve had a great run and this is the first logged lose so far. But it is a big one, -$16,100.
This is how fast it happens. I’m just lucky I brought in a lot more than this in recent months. I brought in more than this with U.S. Steel alone. And, besides this lose, I’m having a great week but this will make it a losing week. There is another problem, I still own another 5000 shares of X. Where will it go. Please read my page “Developing a Strategy.” On this page I write about risk tolerance. You must know your tolerance and what your stomach can handle. Here’s the sell order:
Sell 5000 shares X @ $14.65
Result -$16,100
I’m gonna have to work on my mattress! It’s a little lighter.
Watch for my week ending results. See how the week went.
Steve
The Options Coach