Page 172 - THE MARKET WHISPERER

168 PART 6 - Indices, Sectors And Crystal Balls

60% of Apple movement is tied to market movement, so Apple will almost
certainly drop following the market’s drop. It is true that stocks do very
occasionally “have a life of their own” and Apple could go up even if the
market is dropping, but the risk in trading will be much higher.

SMART Don’t fight the market. Don’t buy stocks moving opposite
MONEY to the market direction, because you will almost always
lose money. Go with the market direction. Going against
the market direction is tough and lies in terrain where only
extremely experienced traders dare to trade-- and even
then, very rarely with success.

Sideways Movement

Let’s assume that you’re interested in buying a stock that is about to
break out, when the market starts moving sideways. Should you buy when
the stock breaks out? I have no perfect answer, but if there is no market
support, the breakout will be much weaker, and the risk high to very high.
The wisest decision in such cases is to buy smaller quantities.

Trend

Let’s assume you wish to buy a stock which is up trending when the market
is downtrending. Should you buy? Most likely, you should not. The most
feasible eventuality is that the market will continue trending down, and
sooner or later your stock will follow the market direction. Institutional
investors buy only in accordance with market direction, and if they don’t
help you, it is better that you don’t buy.

Exceptions

Sometimes I break my rules on purpose. If, for example, I believe something
special is happening to a stock and its chances of rising are particularly
high, I might buy it even when the market is down trending. Of course
there is high risk when I buy against market direction, and therefore my
stop order, which is my protective backstop, will be closer to the buy price,
and of course I will buy a smaller quantity.

Independent Stocks

There are very few stocks which have what is known in professional
jargon as “a life of their own,” meaning that they are not influenced
by the market direction. They are usually stocks with low volume in