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How Traders Get Wealthy Playing Apple, RIM, and Gold Stocks

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The sum of the market's moves form an unquestionable cyclical pattern consistent within all time frames, which traders can learn to profit from.

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Emotions are what separate the successful traders from those that lose money. They can be regarded as a relentless opponent, often showing up without warning and striking you at inopportune times. The successful trader is able to recognize their presence and maintain objectivity, constantly assessing his own strengths and weaknesses.

There will ultimately be times where you can't control your emotions, however you can always control how you respond to them. Any time you recognize that your emotions are influencing your outlook you are already one step ahead of the average market participant. It is at this point that you step back, refocus your perceptions, examine the price action, and then take the appropriate action.

An understanding of herd or mob mentality is important in trading and can provide you with an edge over the average participant who doesn't contemplate what is happening around them. In a mob or riot, we never know what the feelings and motivations are of all the individual participants.

There are, however, certain emotions that seem to appear at distinct times and have a certain predictability in their development. A stock's price action is no different. While we never know the underlying feeling and motivations of all participants, there are distinct emotions that are shared by the herd at various stages of a stock's life. An understanding of these emotions and their implications on the price action of a stock is an advantage that the profitable trader maintains.



The Fruit War – Apples Top While Berries Bottom

It is very interesting that AAPL shares topped the same week RIMM shares bottomed. Could the BB10 be the turnaround for Research in Motion? Either way the market is somewhat predictable as traders and investors buy the rumor that BB10 will be good, and they sell the news once it arrives no matter the outcome good or bad. January 30 is when it's unveiled, so we could see RIM shares continue to claw their way out of the grave. (Please excuse the typo in the chart, which should read "BlackBerry.")



RIM – Daily Chart Look of Price Action



Conclusion

Knowing this information is crucial to survival as this cycle happens on all time frames (1-minute chart all the way up to yearly charts). Harnessing this information for trade selection and timing greatly reduces the amount of trades you take, while focusing only on new leaders which have massive upside potential. (You can see some of my trade ideas which are in Stage 1 Accumulation mode getting ready for takeoff here.)

Judging from the recent price action in the broad market -- S&P 500 (INDEXSP:.INX), Nasdaq (INDEXNASDAQ:.IXIC), Dow (INDEXDJX:.DJI), iShares Russell 2000 Index ETF (NYSEARCA:IWM) -- along with AAPL shares (which have a large impact on index price direction), I feel the market is setting up for a strong Santa Claus rally in the coming week.

2013 looks like it will be a very exciting year for trading and investing as several sectors, stocks, and foreign-country indexes are in Stage 1 basing patterns about to start a new bull market.

Editor's Note: Chris Vermeulen offers more content at his sites, TheGoldAndOilGuy.com and Traders Video Playbook.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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