Stick to the plan, SMCI long idea

Welcome to all new subscribers.

SPY continued its down-trend yesterday. With the weakness in place, SPY will potentially enter an uptrend if closes above 403 now (down from 406 earlier). With the market showing its weakness across the board, both EFA and AAPL are under pressure. Surprisingly, however, neither of them has still not closed below our stop loss point, wherein they will enter a potential downtrend.

Right now there are a lot more opportunities to go short in the market on a bounce than go long. That said, SMCI is holding a good uptrend. It is also part of IBD-50 group of stocks (fast growing fundamentals). According to our system SMCI will be in an uptrend till it closes below 92.50. So if you were to buy SMCI at 98.7 and have a stop loss of 92.50, you would lose $6.20 per share or $620 per 100 shares.

Risk management is an important part of trading. The way I would suggest you do it if you’re just starting out is find an amount that you’re comfortable losing. For some it’ll be $100, for others it might be $500. Nonetheless, don’t keep it anything more than $500, no matter how confident you are in your conviction.

Then pick a system and try executing trades using it at least 10 times, each time risking at most $500. Once you get a hang of the system, then you can start increasing your position size.

That’s all for today’s edition. In the next edition, I’ll talk about how you can de-risk some of the long put positions that you might have in SPY now that it is getting closer to a support level.

Green trading!