Severe Technical Damage

Jul 30, 2007: 12:29 AM CST

While doing my evening scan, I found the following stocks very interesting from the standpoint of major technical damage that has occurred to them over the following days during the market decline.

Of course, I am not advocating trading these stocks – I am only noting that these have interesting patterns that have taken down price to levels beyond support and beyond immediately repairable technical levels.

Note that many traders are trapped in these positions if they haven’t exited already – many of these stocks are pre-scanned for strong fundamental criteria and also positive uptrends (such that you would expect continued creeping upwards price action… but what was expected differed greatly from reality):

 

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There are a many more charts that look worse in the current environment, but some of the largest price declines have (and will) come from stocks that are overpriced and overhyped – in other words, stocks that create the illusion that nothing can go wrong.

Positions that go bad like this do not signal the end of the world or the end of trading careers – these things happen. Our goal is to prepare for them when they do through proper position sizing, money/risk management, and forward thinking anticipation of the ‘worst case’ scenario.

As with any chart I post on the site, learn the lessons, study them, and make the knowledge your own. Never over-leverage yourself, and never bet your whole account (or a disproportionate size of it) on a single trade.

Be safe and trade well.

(Disclosure: I have no current positions in these stocks in any of my accounts)

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