DummySpots.com

Had I pretended to have a crystal ball and said back on Feb 1 “GET SHORT ON GOOGLE, THIS POS IS GOING STRAIGHT TO THE LOW 450s!!”, I would now be tooting my horn and implying some mystical insight. And I would be absolutely wrong. This stuff is about recognizing probabilities, not predicting the future, and there’s a world of difference. Google did form a Marubozu. The Marubozu broke in the probable direction and did in fact telegraph the significant selling pressure that existed at the time. And the stock has followed the most likely path:

However, this was only the most likely of any number of possible paths. We must always always always position with all of those possibilities in mind, not just the one we salivate for. I preach as often as possible that considering how much you stand to lose on each trade rather than just how much you'll make if you're right is one of the great milestones on the road to trading success.

Having considered all appropriate eventualities (sound like a freakin’ politician, no?), what do we do? Sit there paralyzed in fear and not take the trade? NO! Absolutely take the trade, especially the rare super-high probability ones like this, and then manage your risk (i.e. all those “other” possibilities) via your continually-evolving position size and stop management strategies.

Oh, I almost forgot the title of this post– Google has entered the zone of resistance near its previous significant low; depending on your time frame, now’s the time to exit (super-short swinger), to pull your stops down tight (swinger with longer-term ambitions), or leave your stop alone and see if we push through 450 after the requisite noodling (in for the longer-term ride and willing to take a goose egg if it reverses all the way back up).

Cisco’s recent chart pattern looks very similar, and it may start back up as well. It’s not at a level of big resistance, however, so on it, I’ll be watching to either get stopped or add on a retrace- and- breakdown.

Cheers, and best of luck.