Chief Editor
Two weeks ago I spoke about some short-term ensuing weakness. And we sure are experiencing it right now. The Australian market has been in decline over the last two weeks and it looks like there is still some short term sliding to do. At tops of rallies (this is not the top – as rallies can have many tops) this is a typical pattern. Those who stood aside in the first few weeks of the rally – and generally with strong support form the media – later joined the hype only to find that as they arrived at the party others were leaving. Happens over and over again.

Last week I spoke of looking for contrarian opportunities – they are hard to detect but are there – you need to be so much more exhausting in your search.

Last week I also spoke of “pruning”. This is critical right now if you have not done it already. The reason being is, that in retreats like we are experiencing right now, some stocks fall faster than others – and some now have reversed their upward path and are now in decline – set up your stop losses!!

If you are a long term investor your stop losses are maybe set for longer period support levels for example on a weekly or a monthly chart. But be strict in acting when critical points are triggered.

If you are a trader that follows the oft’ touted “buy the dips” just make sure these are dips on an upward trend and not a downward trend. Obvious I know but it happens.

This is just a time to exercise discipline and “keep your powder dry” as the rally will resume although the intensity of the rally of the last few weeks is unlikely to be repeated.

Tom Scollon

PS: You'll notice that this week's newsletter incorporates a new format that allows for the inclusion of advertising. It remains our intention to deliver the Trading Tutors Newsletter as a free service and this new format will allow us to do so. Keep an eye out for some future exciting developments in coming weeks.