Sitting Tight – Jesse Livermore

Men who can both be right and sit tight are uncommon.  I found it one of the hardest things to learn.  But it is only after a stock operator has firmly grasped this that he can make big money. –  JESSE LIVERMORE

Jesse was a legendary trader in his lifetime.   His experiences taught him that even though he was able to made good money trading, he also lost good amounts of money by over-trading.   After decades of trading & investing, he offered the above advice, showing that patience can be rare, but also patience can be more rewarding if you know you are correct about a certain set up and patiently wait for it to unfold.

 As a  trader,  I like to find & buy good set ups and sell them in a few days as they play out,  but I also have tried to find proper set ups and allow them to play out until they are longer term rewarding. Let me give you a couple of examples of how  “Sitting Tight when you know you’re right” can pay off.

I have Tweeted and written in my reports since Jan that the Tight Base in SZYM is the type that can explode higher. I have accumulated it regular along the 50sma and encouraged others to also.  Accumulating low in this progressive base gives you strong hand .  The sideways move through FEB was BORING!  Then it popped and dropped back to test support.

SZYM today – it was boring but is up 20% today alone

 TPLM- where will this be by the end of the summer?

I have been mentioning Steel as possible low risk type base set ups .  We look for low risk entries , like X sitting on the 50sma, or the MAGENTA trend line below.    AKS  looks similar.   If Commodities and Steel are setting up to  run higher and you sit tight , you’d likely do well from this level.  If they don’t run up, your losses are minimal.

For a couple of months I have been mentioning that SOLAR stocks are stealthily doing well.

TSL –   From January it runs up / consolidates / runs up / consolidates.  Now it  looks ready to run up again.  Oversold.   It i possible ha as bumpy of a ride as this has been,  If someone just Bought in January….they may be up 100% by this summer.

CSIQ– Jan lows to now almost 100%   ( 2013 lows to now sitting tight ? 1500%)

SOL  My recommendation  Feb 11  at $1.41 .    Another solar in a base.  I bought the break out , but traded instead of sitting tight.  Do you see where $1.90 is on this chart? It just went there.

SOL  ( Today it just hit $1.89)   If we buy now & sit tight, where might this be at the end of the summer?  2 yrs ago in April SOL was here and was at $6 by the end of the summer.    Roughly 300% off the lows.

MACK–  I love the chart for MACK.   It has run up over 100% from under $6 last summer.  Was it straight up? Or do you see sideways moves and consolidations?   TOUGH to ride out, but it has paid off 100% in 5 months from AUG to DEC.

  SO  Now Lets look at AAPL.  Was it a smooth straight up run the last 10 yrs as it went  (split adjusted) from $5 to $130??  No,  bases and consolidations were all along the way.  It would be tough to just  “Sit tight”, unless you bought low.  it went  up 2500% in 10 yrs!  Could you ( or me) do that trading?

 So  ask 5- 10 yr holders of  AAPL, GOOG, PCLN ,  TSLA,  etc .  Are they happy now?  Oh yes.   They talk about holding a 10 bagger , etc .  Most of these investors  could never have a 10 bagger without getting in low and sitting tight.   They had to hold during consolidation phases and though this can be tedious, they were well rewarded.

WHAT IS THE POINT?

I am a trader , so I know that Traders love to trade.  I will always love to find proper set ups and trade them , but Jesse was correct in his observation.    At times,  patience in the right situation is what pays off the most . You saw from those above examples that many were up 100% in 6 months to 300% in a yr.     So lets honestly ask ourselves…   ” I am a fast trader, and I consider myself good.  Is my Account up over 100% in the past 6 months?  300% in the past yr?”   Many stocks that we trade are, so it gives us food for thought about over-trading.   I love trading and will always try to be nimble,  jumping in and out of good set ups.   Looking back ,  I have also found that I made better money in the past   ( Miners , Energy , Tech , etc)   entering  undervalued,  often beaten down & oversold stocks,   buying low and riding  them higher for weeks.  I have been trying to focus on some opportunities like that ,  as well as good trade set ups.

It certainly doesnt mean we just want to buy & hold anything.  Even Bull Markets can correct sharply, but at times …  if we know we are right?  It may be best to just sit tight.  Thanks for visiting chartfreak.com

~ALEX