• T. Livingston

Volatile Times

There's an old Chinese saying, "May you live in interesting times." I'm not sure if it is a blessing or curse, but these are "interesting" times for sure. And volatile times as well. This week, we say increased volatility in the market. Covid19, the 2020 Presidential Elections, earnings announcements, it just seems like so much is happening all at once. Some leaders such as Telsa, Amazon, Apple, Shopify, Square and Zoom have broken down and the Nasdaq and S&P 500 are now both below their 50-day moving averages. I've taken some action this week to protect myself during these volatile times.


Earnings Announcements

The first decision I made was to avoid holding positions over earnings where I did not have a large cushion. This allowed me to take small losses in Amazon, Shopify, and Apple. However, there is no guarantee this will be the case will all stocks. I decided to sell SEDG for a profit rather than hold it over its earnings announcement next Monday. There definitely is a possibility that it will gap up and go on a strong run higher like Pinterest did this week. However, for me, my main focus at this moment is to focus on risk management, especially in this environment.


Raise Cash

I also raised lots of cash this week. I did this by selling stocks that lost their 50-day moving average such as Plug Power ($PLUG) and Digital Turbine ($APPS). My mindset is that I can always get back in if things improve.


Patience

My next focus is on patience. There really is no need to trade every day. I'm pretty confident that sometime in the future there will be fantastic opportunities again, either to buy breakouts or to buy pullbacks to key support levels. It's really just a matter of having the discipline to wait for these moments to appear.


Holding My Best Positions

I've also decided to continue holding some of my best stocks, such as Nio. If it breaks down, I can exit, but I want to let the market decide on this one. It's just remarkable to see the runs Pelton, Square, Zoom and others have gone on this year. It's important to remember these moves as an example of the power of sticking with a true market leader.


Selling Stocks At Breakeven

I also decided to sell some stocks I owned near breakeven. If they reverse, I can always look to reenter, but with increased volatility I want to limit the potential of a massive account drawdown.


Being Flexible

I'm open-minded to multiple possibilities. I can see a scenario where the market shapes up rather quickly and we see a strong fourth quarter. I can also see a scenario where the market and leading stocks pull back hard towards their 200-day moving averages. I'm really not attached to any particular outcome; rather, I'm more focused on listening to what the market has to say.



Keeping Politics Separate From Trading

We are living in extremely polarizing times. The truth is, there have been great bull markets under Democrats and great booms under Republicans. I try to keep my politics contained to the voting booth because I know that when trading, it is only the market's vote that counts.


Yes, these are indeed "interesting" times, but thankfully there's always opportunities to scale back on your risk exposure if times get too volatile and overly "interesting."


Full Disclosure: Nio is a stock I currently own.

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