New America stock ASIA breaks out and I automatically buy some

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On May 10, I wrote: “So, stocks on the New America list often take off sometime after their story is published in IBD.   One recent addition to the New America list that looks promising technically to me if it can break $18.60, is ASIA. ”

After I wrote that post, I placed a   GTC (good til cancelled) trigger order with my broker to buy ASIA if the stock traded above $18.60.   Sure enough, a week later, on Tuesday, ASIA broke out on huge volume.   I was at an all day meeting on Tuesday, when ASIA broke 18.60 and I bought my shares automatically at around $18.66.   One does not have to watch the market in order to buy break outs.   Just use trigger or buy stop orders. ASIA closed Tuesday at 19.44. I will now place a GTC trigger order to sell ASIA if the stock falls below $17.   These trigger orders take the emotion out of the trade. Note on the chart where “NA” indicates when ASIA appeared in the IBD New America column. It makes sense to monitor stocks that appear in the New America column.

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The dirty little secret about the up-tick rule: rigging the market

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The uptick rule is designed to prevent short sellers from jumping nonstop on a declining   stock and driving it to oblivion. It was implemented in 1938 in the aftermath of the the depression and the huge market declines.   Every bear market needs a scapegoat and the public loves to blame the villainous short-sellers for everything that goes wrong.

Short sellers borrow stock from their broker and sell it at the current price, hoping to buy it back at a lower price and returning the borrowed shares to the broker.   Anyone with a margin account signs an agreement to allow the broker to lend out the shares in the account.   In truth, you never know your shares are gone because the short seller has to pay you any dividends that are paid while he has borrowed your shares.

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How I use put options as investment insurance

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There were 7 new highs and 1,221 new lows in my universe of 4,000 stocks on Friday.   The QQQQ completed the 14th day of its short term down-trend within a longer term down-trend. I heard on Fast Money that the AAII survey has the most bearish reading ever.   Furthermore, the momentum indicator in IBD for the Nasdaq 100 index futures is below 25%, the place from which   rallies tend to begin.   And with the T2108 at 7%, in deeply oversold territory, I am becoming reluctant to add more shorts right now.

Last week, a person who knows nothing about the market asked me how to short stocks.   This is reminiscent of the   stories of the shoeshine boys providing stock tips, near the roaring 20’s market’s top.   The sentiment is just too negative right now.   Does this mean the market has to turn up?  

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