{"id":7618,"date":"2020-09-10T16:42:07","date_gmt":"2020-09-10T20:42:07","guid":{"rendered":"https:\/\/morpheustrading.com\/blog\/?p=7618"},"modified":"2022-04-06T15:04:55","modified_gmt":"2022-04-06T19:04:55","slug":"trade-mgmt-sept-selloff","status":"publish","type":"post","link":"https:\/\/morpheustrading.com\/blog\/trade-mgmt-sept-selloff\/","title":{"rendered":"How We Beat the Stock Market&#8217;s Recent Sell-off"},"content":{"rendered":"\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"1200\" height=\"800\" src=\"https:\/\/i0.wp.com\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/precision-trading.jpg?fit=640%2C427&amp;ssl=1\" alt=\"\" class=\"wp-image-7684\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/precision-trading-110x73.jpg 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/precision-trading-300x200.jpg 300w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/precision-trading-768x512.jpg 768w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/precision-trading-1024x683.jpg 1024w\" sizes=\"auto, (max-width: 1200px) 100vw, 1200px\" \/><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">TABLE OF CONTENTS<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/morpheustrading.com\/blog\/trade-mgmt-sept-selloff\/#As_stocks_began_plunging_sharply_last_week_our_rule-based_market_timing_system_enabled_us_to_quickly_lock_in_gains_and_minimize_losses_when_the_current_correction_began_Heres_a_look_at_how_we_did_it_and_the_end_result_of_our_positions\" >As stocks began plunging sharply last week, our rule-based market timing system enabled us to quickly lock in gains and minimize losses when the current correction began. Here\u2019s a look at how we did it and the end result of our positions.<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/morpheustrading.com\/blog\/trade-mgmt-sept-selloff\/#Letting_profits_ride_vs_playing_defense\" >Letting profits ride vs. playing defense<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/morpheustrading.com\/blog\/trade-mgmt-sept-selloff\/#Hanging_Man_A_crucial_NASDAQ_warning_sign\" >Hanging Man: A crucial NASDAQ warning sign<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/morpheustrading.com\/blog\/trade-mgmt-sept-selloff\/#The_Scorecard\" >The Scorecard<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/morpheustrading.com\/blog\/trade-mgmt-sept-selloff\/#Lululemon_LULU\" >Lululemon ($LULU)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/morpheustrading.com\/blog\/trade-mgmt-sept-selloff\/#Amazon_AMZN\" >Amazon ($AMZN)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/morpheustrading.com\/blog\/trade-mgmt-sept-selloff\/#Advanced_Micro_Devices_AMD\" >Advanced Micro Devices ($AMD)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/morpheustrading.com\/blog\/trade-mgmt-sept-selloff\/#Pinterest_PINS\" >Pinterest ($PINS)<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/morpheustrading.com\/blog\/trade-mgmt-sept-selloff\/#Choosing_your_battles_The_most_important_success_factor_for_traders\" >Choosing your battles: The most important success factor for traders<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"As_stocks_began_plunging_sharply_last_week_our_rule-based_market_timing_system_enabled_us_to_quickly_lock_in_gains_and_minimize_losses_when_the_current_correction_began_Heres_a_look_at_how_we_did_it_and_the_end_result_of_our_positions\"><\/span>As stocks began plunging sharply last week, our rule-based market timing system enabled us to quickly lock in gains and minimize losses when the current correction began. Here\u2019s a look at how we did it and the end result of our positions.<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In a raging bull market like we&#8217;ve seen over the past few months, it can be easy to forget that all stocks <em>eventually<\/em> go down as well.  <\/p>\n\n\n\n<p>But knowing when to protect profits and play defense is one of the most critical <em>and<\/em> challenging aspects of trading.  <\/p>\n\n\n\n<p>Since stocks typically fall much faster than they rise, complacency during market corrections is a sure-fire way to blow up your trading account. <\/p>\n\n\n\n<p>Rather, successful traders proactively take control with precision position management when the going gets tough.<\/p>\n\n\n\n<p><em>Continue reading<\/em> to discover a simple way to protect your profits during sudden market reversals, as well as a key warning signal that will often guide you.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Letting_profits_ride_vs_playing_defense\"><\/span>Letting profits ride vs. playing defense<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Knowing when to let the profits ride versus when to play defense is a life-long pursuit for every trader&#8211;regardless of one&#8217;s experience level and profitability.  <\/p>\n\n\n\n<p>Selling too early can severely limit your profits, but not selling quickly enough when sentiment turns negative is even more damaging.<\/p>\n\n\n\n<p>Many factors typically go into our decision making process of determining when to sell a stock. <\/p>\n\n\n\n<p>Sometimes it is just the price action of the stock itself, but sometimes stocks are just too extended overall&#8211;making the broad market vulnerable to a sharp sell-off.  <\/p>\n\n\n\n<p>The latter was the case over the past week.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Hanging_Man_A_crucial_NASDAQ_warning_sign\"><\/span>Hanging Man: A crucial NASDAQ warning sign<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>After closing higher in nine of the ten preceding days, the benchmark S&amp;P 500 Index formed a bearish &#8220;<a href=\"https:\/\/www.investopedia.com\/articles\/active-trading\/040914\/understanding-hanging-man-optimistic-candlestick-pattern.asp\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"hanging man (opens in a new tab)\">hanging man<\/a>&#8221; candlestick pattern on September 2.<\/p>\n\n\n\n<p>Combined with many leading stocks making parabolic moves, the hanging man formation immediately put us on high alert for a potential sell-off the next day.<\/p>\n\n\n\n<p>After a steady run of big gains in our newsletter&#8217;s model portfolio, we knew it was time to immediately tighten stops in our open positions and (at least temporarily) avoid new buy setups.<\/p>\n\n\n\n<p>Below is the exact commentary and chart we shared with subscribers in the September 3 issue of <em><a rel=\"noreferrer noopener\" aria-label=\"The Wagner Daily (opens in a new tab)\" href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\">The Wagner Daily<\/a><\/em> report:<\/p>\n\n\n\n<p><em>&#8220;Nasdaq 100 ETF ($QQQ) closed with a bearish hanging man candle on Wednesday, which is a bearish signal that should be confirmed by lower closing action the following day. <\/em><\/p>\n\n\n\n<p><em>&#8220;There are no new setups for Thursday.  Given the steep run-up in $QQQ and the hanging man reversal candle, we&#8217;ve decided to tighten up stops on all open positions.  All stops are in, so it&#8217;s up to the market to decide what is next for our portfolio:&#8221;<\/em><\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"880\" height=\"769\" src=\"https:\/\/new.morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/qqq.png\" alt=\"\" class=\"wp-image-7622\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/qqq-110x96.png 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/qqq-300x262.png 300w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/qqq-768x671.png 768w\" sizes=\"auto, (max-width: 880px) 100vw, 880px\" \/><figcaption><br \/><\/figcaption><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_Scorecard\"><\/span>The Scorecard<br \/><br \/><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Lululemon_LULU\"><\/span>Lululemon ($LULU) <span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<h5 class=\"wp-block-heading\">+17.8% gain<\/h5>\n\n\n\n<p>We were showing an unrealized gain of nearly +20% in $LULU (remaining half position) when it closed with a bearish, hanging man candlestick on September 2. <\/p>\n\n\n\n<p> We decided to go with a really tight stop, enabling us to lock in a gain of +17.8% with an exit at $393.22.<\/p>\n\n\n\n<p>Just four days later, $LULU is currently trading approximately 17% below our exit point:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"932\" height=\"735\" src=\"https:\/\/new.morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/LULU-1.png\" alt=\"\" class=\"wp-image-7644\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/LULU-1-110x87.png 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/LULU-1-300x237.png 300w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/LULU-1-768x606.png 768w\" sizes=\"auto, (max-width: 932px) 100vw, 932px\" \/><\/figure>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Amazon_AMZN\"><\/span>Amazon ($AMZN)<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<h5 class=\"wp-block-heading\">+8.2% gain<\/h5>\n\n\n\n<p>$AMZN was showing an unrealized gain of roughly +10% since our August 12 buy entry.<\/p>\n\n\n\n<p>We tightened the stop to just below the September 2 low, enabling us to secure a gain of +8.2% when our stop was hit:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"1019\" height=\"733\" src=\"https:\/\/new.morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/amzn-1.png\" alt=\"\" class=\"wp-image-7642\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/amzn-1-110x79.png 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/amzn-1-300x216.png 300w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/amzn-1-768x552.png 768w\" sizes=\"auto, (max-width: 1019px) 100vw, 1019px\" \/><\/figure>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Advanced_Micro_Devices_AMD\"><\/span>Advanced Micro Devices ($AMD)<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<h5 class=\"wp-block-heading\">-2.3% loss<\/h5>\n\n\n\n<p>Not all our open positions in  <a rel=\"noreferrer noopener\" aria-label=\"The Wagner Daily (opens in a new tab)\" href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\"><em>The Wagner Daily<\/em><\/a> were clear winners.<\/p>\n\n\n\n<p>Some trades, like $AMD, were just beginning to work out when the NASDAQ flashed its hanging man warning sign.<\/p>\n\n\n\n<p>We would have been out of $AMD with a 5% loss <em>if<\/em> we had stuck with our original stop price.<\/p>\n\n\n\n<p>However, we raised the stop to just below the low of the August 31 breakout day and limited our risk to a loss of 2.3%.<\/p>\n\n\n\n<p>We could have set a tighter stop, but we wanted to give $AMD some room in case it showed relative strength during a potential pullback:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"1018\" height=\"733\" src=\"https:\/\/new.morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/AMD-2.png\" alt=\"\" class=\"wp-image-7646\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/AMD-2-110x79.png 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/AMD-2-300x216.png 300w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/AMD-2-768x553.png 768w\" sizes=\"auto, (max-width: 1018px) 100vw, 1018px\" \/><\/figure>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Pinterest_PINS\"><\/span>Pinterest ($PINS)<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<h5 class=\"wp-block-heading\">+1.8% gain<\/h5>\n\n\n\n<p>Like $AMD, our $PINS trade was just beginning to move higher as well.<\/p>\n\n\n\n<p>The price and volume action on September 1 was constructive, but our focus turned to playing defense after a hanging man formed at the highs on September 2. <\/p>\n\n\n\n<p>We set our stop for <em>half<\/em> the position out beneath the September 2 low, with the second half set at break-even (just below support of the 10-day moving average).<\/p>\n\n\n\n<p>After both stops triggered, we still netted a small gain of +1.8% on the $PINS trade:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"1019\" height=\"733\" src=\"https:\/\/new.morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/PINS-1.png\" alt=\"\" class=\"wp-image-7648\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/PINS-1-110x79.png 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/PINS-1-300x216.png 300w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2020\/09\/PINS-1-768x552.png 768w\" sizes=\"auto, (max-width: 1019px) 100vw, 1019px\" \/><\/figure>\n\n\n\n<p>It&#8217;s important to note that tight stops are <em>not always<\/em> the answer&#8211;especially when the market is just breaking out from a base and leading stocks are not extended.  <\/p>\n\n\n\n<p>However, before the current correction began, the Nasdaq was already well extended above its 20 and 50-day moving averages before it flashed a hanging man warning signal.   <\/p>\n\n\n\n<p>When the market is extended and vulnerable to a sharp selloff, it&#8217;s best to tighten up stops in winners and in stocks where you haven&#8217;t made much progress.<\/p>\n\n\n\n<p>Again, selling a winning stock is never easy and we sometimes get it wrong.  <\/p>\n\n\n\n<p>But given the multi-day plunge that followed, we are quite pleased with the way we managed the winning stock trades in our model swing trading portfolio.<\/p>\n\n\n\n<p>With our <a rel=\"noreferrer noopener\" href=\"https:\/\/new.morpheustrading.com\/blog\/relative-strength-stocks-march-2020\/#sell-off\" target=\"_blank\">timely exit out of all long positions the week of February 24<\/a> (the start of the coronavirus bear market), this marks the second time this year our market timing system neatly locked in gains and kept us out of trouble.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Choosing_your_battles_The_most_important_success_factor_for_traders\"><\/span>Choosing your battles: The most important success factor for traders<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Picking the right stocks to buy is only one small element of being a consistently profitable trader. <\/p>\n\n\n\n<p>Much more important is knowing exactly when to step on the gas pedal with aggressive buying, versus when to play defense and sit on the sidelines.<\/p>\n\n\n\n<p>For now, we are laying low on the sidelines while waiting for the correction to find a bottom. But we will surely be ready for the next massive bull run when the time is right.<\/p>\n\n\n\n<p><strong><a rel=\"noreferrer noopener\" aria-label=\"Sign up now  (opens in a new tab)\" href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\">Sign up now <\/a><\/strong>for <em>The Wagner Daily <\/em>to be instantly alerted when it&#8217;s time to start profiting from buying leading growth stocks again.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>As stocks began plunging sharply last week, our rule-based market timing system enabled us to quickly lock in gains and minimize losses when the current correction began. Here\u2019s a look at how we did it and the end result of our positions. In a raging bull market like we&#8217;ve seen over the past few months, [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[3],"tags":[],"class_list":["post-7618","post","type-post","status-publish","format-standard","hentry","category-stock-trading-strategy"],"_links":{"self":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/7618","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/comments?post=7618"}],"version-history":[{"count":24,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/7618\/revisions"}],"predecessor-version":[{"id":11156,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/7618\/revisions\/11156"}],"wp:attachment":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/media?parent=7618"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/categories?post=7618"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/tags?post=7618"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}