Tuesday, July 01, 2008

Watch for the warning signs

If you have been long stocks, the last couple of weeks would have been brutal. The bears have definitely held the upper hand, and it seems (nearly) everyone accepts we are now in a bear market. Of course, alert traders would have been aware of this for a while now - banking stocks for example topped out early last summer, before 'Credit Crunch' became the phrase used in every news bulletin.

Below are two charts of fallen favourites that topped out a while ago, and have since been in a down trend, culminating in the share price falling off a cliff this week - Tanfield (LSE:TAN) and Southern Cross Healthcare (LSE:SCHE).

Even if you are by definition a long term holder, you should always keep an eye out for the warning signs. Trend followers have no preference whether they make money on the long or short side - all they care about is being on the correct side. No doubt trend followers who were short of these two stocks have had a very profitable week. As for me, I managed to put my money into other stocks and missed both of these.



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