Are You a Trader or an Investor? Now's the Time to Decide
The market has had a great run, so choose now whether to lock in some gains or let 'em ride. Me? I'm making my moves on Nvidia, Uber and others.
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After a tremendous run over the last two weeks, the indexes are trading mixed on Tuesday morning. Breadth is slightly negative, but over 400 stocks are hitting new 12-month highs.
The most notable aspect of the market currently is how stocks have blasted through overhead resistance and have extended much further than many folks had anticipated. By just about any technical measure, many stocks are now too high to buy.
So, what do you do at this point?
That depends on your approach to the market. Now is the time to be very clear about whether you are a long-term buy-and-hold investor or a trader who wants to take advantage of short-term volatility.
If you are a long-term investor, then you do nothing. Stocks may be overbought in the short term, but if they were bought for their superior fundamentals and long-term prospects, then they should hold on tight. There is no reason to micro-manage the investment if you are not a trader.
If you are an active investor or a trader, then you have to decide how aggressive you want to be as stocks become more extended. It is prudent to make some partial sales and lock in gains when there is a big run, and stocks are hitting resistance, but the danger is that they keep on running without you, and you never get back in.
With the market as extended as it is now, the odds are that we are close to some consolidation or a pullback. The dips may be shallow, but if you are vigilant and move quickly, you should have a chance to take advantage of some volatility.
The biggest mistake that many active investors make is not buying back stocks that have sold aggressively. There is a natural resistance to reverse the action you just took, and many traders will hesitate too much.
This morning, I’ve reduced some holdings, including Nvidia NVDA, Viking VKTX, TG Therapeutics TGTX, and UBER. I still like all those stocks very much and think they will go substantially higher over time, but I have some nice gains that I want to book, and then I’ll be on the hunt for some better-looking entry points.
I’m a trader, and I’m trading this action, and that has nothing to do with the fundamentals of the stocks that I like.
At the time of publication, DePorre was long NVDA, VKTX, TGTX, UBER.
