Analysis of a position

QUESTION (part of a more extensive email and follow-up): You didn't make any mention of looking at overall market Trend, economic cycles and sector performance. Do these areas matter in your decision to trade or do you simply look at individual stocks Support & Resistance, trend lines etc?

ANSWER: I do look at the overall market trend as a larger guide, but many positions based upon momentum moves on news and the like will not correspond as significantly to the overall market bias, so there are many times when I am trading such securities that I will take them even if they go against the larger market. However, risk will almost always be lessened if that trend is in place to support it. To that extent, economic cycles also come into play. These are more important when trading on a weekly or monthly time frame than they are to most swing and daytraders. When it comes to sector performance, this ties into the trend answer in that the sector's favor, while very helpful, is not always necessary. It depends more upon whether or not the security typically follows the general direction of the larger sector trend. Some do not. If they do, however, I would be less likely to take a position that is at odds with the bias of the sector or goes against what appears to be the bias of the major names within the sector. Just because a stock has better relative strength and is forming a buy setup does not mean it can break higher if the rest of the sector is more short biased. In fact, that stronger stock may easily be the one to drop the hardest in some instances.