Market Talk with Piranha is currently moving to its new home at The new site is up and running but many of the posts need editing as the images and stock charts did not transfer successfully (thanks blogger). I will post all new entries to both blogs – Thank you for your patience while I make this change!

Tuesday, July 26, 2005

Market Talk

Someone I have had conversations with on another forum posted his frustration with AFFX and the 20% drop last week. I completely understand his frustration and have lived through the same type of drop that has blown past my stop loss. I don’t use stop limits but a drop like the one AFFX had would never trigger the stop limit unless the stock moved back up to the limit price, then the stock would be sold automatically. I responded to this investor’s post and his two comments about AFFX and the general market conditions:

“I know what you mean when it fell overnight. I have been hit by that kind of action and trailing stops are crushed. A stop limit would never get triggered and a stop loss would get filled much lower than the target price. It happens and is part of the game; this is why I use mental stops. I talked at length about this early last year when I kept getting burned by the MM’s. I still use physical stops but I try to sell "at the market" during earnings season and from MM’s. You may want to buy a put option to hedge your position during earnings season. For a minimal fee, you can buy the put option and use the leverage when a 20% drop happens like the one you witnessed. I rarely use this method (but have on a few occasions) but know of several people that feel comfortable employing this strategy often.

As for your market analysis, I agree. Something is up with the market but I don’t see a huge downturn. Maybe a correction as Kevin (MSW community member) pointed out. I was sold out of two of my positions last week and my watch list for new buys got hit with red ink. The daily new highs are still positive so I am not getting all of the concrete red flags that this market will totally flop. This year is just another post election year with sideways action. Tough investing year! Watch the critical 2100 level for the NASDAQ, this provides major support.”


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