Today's Market
by Dr Invest

Occasionally we all get a good spanking by the stock market. Today was my spank-down. Here is the way it played out.... WMT (walmart) reports earnings to the positive and projects continued earning through the end of the year. WMT falls over 4% this morning and when combined with the 2.38% previous fall, it trips my stop-sell set at 5% below the purchase price.

Well the world has not ended. My investment in WMT was only 11% of my total portfolio and 1/3 of my stock position. I never want to lose money, but investments have risks. It is time to make lemonade from the lemons. Here's how we can do that.

Let's look at the chart for WMT:

Since mid-October WMT has fallen 11%. The expectation was that WMT would rebound after the election, instead it fell over 5% and was sold by my stop-sell. The three yellow lines represent support. Typically WMT would have found support at $73, but it fell through that support line. I suspicion that WMT could continue falling for several reasons: 1. Obama's continued stimulus policies, 2. Obama's tax plan, 3. Obama's continued war against business, 4. The fiscal cliff, 5. The capital gains bottle neck to sell off stock positions and move into cash positions to limit higher capital gains tax rates.

Please note that I didn't even include the ominous clouds of war and bankruptcy of Greece, Spain, Portugal, and Italy. All of the above may be creating an inescapable contagion which could lead us further down, instead of plodding on the flat-line growth we have been maintaining.

STRATEGIES

One way to deal with the loss on WMT is to set a STOP-BUY $1 above the closing price. A STOP is the price you want to BUY WMT. WMT closed at $68.72, so I would set my STOP at $69.72. Should WMT rise in price to $69.72 my STOP BUY would purchase SHARES of WMT. The magic of this strategy is that WMT will likely continue on its journey downward if the market is crashing. On the other hand, if the downtrend is temporary, a sudden rise by 5% would trigger the STOP BUY and you would enjoy the gains.

The second strategy is to simply buy another stock that is moving upward.

The above chart shows DLTR, TGT, DG, and FDO rising even as the DOW declined. Any of these should be buying opportunities. I got smacked pretty good by my purchase of WMT, but nothing ventured is nothing gained. I will be interested in these stocks as we look at the week coming to a close.

(Note: the above information is for entertainment purposes only and not to be used in any way as investment advice.)