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We had someone ask what to do about the economic releases that we
get at 10:00 a.m.
His question was a common one because often the market is doing well
and then "boom,"
the numbers hit and the whole thing goes to pot.
We could be a wise guy and say, "listen to the 10:00 a.m. rule!,"
which as you all know by now has
been a stalwart of sanity for years. Basically, we should all be
looking at the market "after" 10:00
a.m., but, it's so true that sometimes a stock is set up so well in
the first 15 minutes, it seems a
shame to just let it pass you by. What to do?
Here is a hint. If you have a breakout stock working for you and
it's
9:45 and it crosses your entry price, it's not a sin to buy into it.
But, if you realize that 10:00
a.m. is going to bring an economic report, you have to keep your
finger near the trigger. A fairly
wise way to play it is like this:
You buy the stock when it crossed your entry point and then "hope"
you
get some wiggle room in it ahead of the release. Well, let's say you
bought XYZ at 50 and at 10:00, it's up to 50.28. Then, the economic
report hits and the market hates it. In a flash, XYZ is 50.15 and
sinking. Don't wait for it to violate your entry, bail out if it
hits
50.05. If it bounces off 50 and starts higher again, watch the rest
of
the market. If the market isn't improving, stay away.
Now if the overall market is firming and it looks like a decent
bounce, try re-entering the stock as
near to 50 as you can. If the move is for real, hopefully you will
be comfortably higher in a few
minutes and can breathe again!
If you wait until after 10:00 a.m. to buy in, it's very possible
they will like the economic report
and the market will surge. That might take your "pick" away from
you, becoming too expensive to hop
into. Don't get upset, watch for pullbacks and entry points that are
higher than you liked, but not
insane. Usually, you will get a pretty hefty pullback sometime
during the day that lets you buy in,
even though it's higher than you wanted.
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