Sitting On My Hands Watching And Waiting

by Olivier on March 15, 2011

The images of destruction from Japan are very tough to digest. My heart goes out to all those affected by recent events!

What most traders probably have on their mind right now is how everything related to Uranium stocks will evolve. I sure was very bullish on Uranium before the earthquake and tsunamis hit Japan. Now we have the threat of a nuclear catastrophe hitting Japan. Ironically the charts actually started deteriorating before the problems hit Japan and the Fukushima nuclear reactor news hit the wires. I decided to go to cash and managed my risk because the overall market was showing serious signs of distribution. Instead of asking the ‘Why?’ question I asked the ‘What?’ question. Put another way, I wasn’t interested in finding out ‘why’ the charts were deteriorating but instead focused on ‘what’ the charts looked like and ‘what’ the appropriate course of action was. The risk was to make a wrong decision and sell at the lows. On the other hand I was getting out of harms way should the proverbial s*** hit the fan. Hindsight is always 20/20. Then again, my job as a trader is to do everything I can in order to stay in the game. If disaster strikes and I am not prepared I am out of business. I cannot let this happen. That’s why I am always willing to ‘sell first and ask questions later.’

Now the hard work begins. I am watching the tape like a hawk. I patiently watch events unfold. I am replenishing my watch lists. To make a long story short, my job is to identify stocks that hold up extremely well. These stocks are the ones that have great odds ending up being huge winners going forward. It is what I recently described as the beginning of a new cycle.’

A few stocks that are starting to attract my attention are: SOLR – GT Solar, IPGP – IPG Photonics, GLNG – Golar LNG. Not exactly surprising as Solar and Natural Gas are now perceived to be the main beneficiaries of the meltdown in Uranium stocks. Here are the corresponding sector overview charts:

With regards to Uranium I think Lord Maynard Keynes’ famous quote nails it:

When the facts change, I change my mind. What do you do Sir? – Lord Maynard Keynes

Will the nuclear renaissance materialize or will the world ultimately end up giving up on nuclear energy? Actually I do have strong opinions on this subject, but my opinions do not matter. The charts always trump my personal opinions. The chart technicals are now officially broken. Over the years I have learned never ever to argue with the charts. They will now either set up again or another wave of selling will hit the uranium sector. I have no idea what will happen. But there’s one thing I know for sure. If the technicals tell me to buy, I’ll be there and do what the charts tell me to do.

I urge you to re-read Justin Mamis’ piece on “Why asking the ‘why?’ question is the wrong approach as a trader.” As a matter of fact I do recommend reading all the books written by Mamis. He is one of my favourite authors and his thoughts were instrumental in shaping my thinking and my approach to the markets.

Forget about your opinions. Listen to the charts.

My public list with all my charts can be viewed here:

Buenas noches!

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