As I was looking through some of my favorite trading books this weekend many quotes that I have highlighted in the past reminded me what Apple bulls have done correctly during this epic run up in 2012. Congratulations on all your profits and here are some quotes that might explain what we all did right, what the bears did wrong, and what to do going forward.
“In a bull market your game is to buy and hold until you believe that the bull market is near its end.” -Reminiscences of a Stock Market Operator
“Letting your profits run is tough psychologically. But understand that in trying to protect every penny of your profit, you actually prevent yourself from making the big profits.” -Michael Covel
“As long as a stock is acting right, and the market is right, do not be in a hurry to take a profit” (How to Trade in Stocks [Greenville: Traders Press, 1991], 21). You can’t make big money in stocks if you don’t give them a chance to make big money for you. O’Neil recommends “take your losses quickly and your profits slowly,” because “your objective is not just to be right but to make big money when you are right”
“In our experience, there is nothing easier than making big money in the market once you have latched onto a big winner, because at that point all you are doing is sitting more and thinking less. When your stocks are trending nicely to the upside and you are fully invested, there is, from a practical standpoint, very little to do. You are simply letting your winners run. This is what we like to call “being in the zone,” a mental space that derives from Livermore’s principle: “It never is your thinking that makes big money. It’s the sitting” -Chris Kaher/ Gil Morales
“The winning investor’s objective should be to have one or two big winners rather than dozens of very small profits” -Chris Kacher/Gil Morales
“The fact is that the best monster stocks find support at the 50-day or the 200-day line during the base building phase.” -John Boik (Check out a long term Apple chart.)
“Not following the rule of “hold your biggest winning stocks” is one of the key reasons why so few have ever made big money in the stock market — they simply sell too soon and hold on to their losers hoping for a comeback. Recall Jesse Livermore’s words of wisdom: “The big money is made in the big swings … and it’s not the thinking that makes the money, it’s the sitting.” -John Boik
“One sell rule he established then was to hold leading stocks that surged 20% or more during the first three weeks after breaking out of a proper basing pattern. These, he would discover, usually turned out to be the biggest winners. Another important selling rule he implemented was to sell and lock in profits when the market begins to turn down and head for a major correction, as he discovered that even the best leading stocks succumb to hard breaks in price when the market falls.” -John Boik on how William O’Neil trades
When should we consider taking our profits and going to the sidelines? Here is one suggestion that would have kept us in perfectly for the trend so far:
“A “violation” is defined as a close below the 10-day moving average followed by a move on the next day below the intraday low of the first day.” -Chris Kacher/Gil Morales (I prefer the 5 day ema not retaken by the close as my stop, but this suggestion from Kacher/Morales keeps you in longer but you will give up more profits when the trend does finally reverse.)
And a message for our bear friends that have fought the last 100 point uptrend:
“Cardinal Rule #1 is to sell short only during what you believe is a developing bear market, not a bull market.” -William O’Neil/Gil Morales
Stay hungry, stay foolish my bull friends.