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Shedding Velocity

By Mark Manning

 About this article:
 In my past few columns, I have noted that my indicators on the indices and many stocks are overbought. It appears to me that investors and traders have moved from buying the dips to chasing momentum. When that happens, the possibility of risk dramatically increases. Investors need to consider -- according to their individual time frames -- systematically taking profits and adjusting protective stops to protect against a possible sharp reversal. Investors also need to be aware that overbought markets may become much more overbought. When emotion kicks in and individuals fear being left behind, they usually start buying at any cost -- and that is when tops typically start to develop. However, investors and traders have very short memories. If they have taken substantial losses, there is a high emotional attachment to trying to make their money back. This is the downfall of many traders and...

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