Page 310 - THE MARKET WHISPERER

306 PART 10 - Winning Trades

The answer is simple: there are more sellers than buyers. But that
is not enough an explanation, so let us look a little deeper at who these
sellers are. There are two possibilities: the first is that you have simply
made a mistake and gone for the wrong stock at the wrong time. In other
words, the stock you chose was weak, or the market or its sector dropped
at precisely the breakout moment. In such cases, you should exit as quickly
as possible and absorb the loss. Another explanation is that the big players
are trying to shake out buyers like you. The big players, who know your
entry point and know how pressured you will be over a drop in price
before making any profit, may take advantage of the expected volume at a
strong breakout in order to sell large amounts, which would otherwise be
difficult to sell. The result is a drop in price that snowballs and brings the
price down to where large market players are buying up again, much more
cheaply. Perhaps from that point on they will allow the stock to rise safely.

When I find myself in this situation, I tend to wait until the hysteria has
died down, and then happily increase the amount of shares which are now
15 to 20 cents beneath my entry price, before the stock price begins to pull
back to the breakout level. This kind of situation generally occurs within
several minutes. If the stock does not return to its high within several
minutes, get out!