The Men Who Stare at Charts: Ups and Downs of Trading Psychology

I have had countless situations where I’ve taken a solid profit on a stock and then watched it explode much higher. ROKU is the most recent situation. It’s tough, but it is what it is. It is really easy to see the gains you missed out on when a stock explodes higher.

But what about the losses you missed out on? Last June I wrote this post talking about Inogen (INGN) as a major valuation trap…

A More Detailed Short Thesis for Inogen (INGN)

The stock then traveled from 185 to 280 (I stopped out somewhere along the way to keep the loss from being short an utter pig of a stock contained). The market was not right ultimately, but it was right long enough to screw many a short.

Anyway, long story short I was actually looking at the since bombed out chart of INGN (still no value fundamentally, mind you) and considering the would-be bottoming pattern it had formed over the last several months because hey, if the market was stupid enough to drive it to 200 (let alone 280), maybe it would be stupid enough to bounce it to the SMA 200 just above 180 or even a gap fill around 200.

I decided to leave it alone with earnings due out. Today this pig is down 23% on earnings and guidance. So when you think about it, avoiding a big loss is just as valuable as making a big gain (that you can then crow about at cocktail parties or on your blog). You avoid the big loss and you think “phew, that was a close one…” but you make a big gain and you’re like the kid on the Titanic, “I’m king of the world!”. Stop it, already. It’s just the casino market.

Moral of the story? If a man (such as myself) stares at a chart and tells you about the compelling patterns he sees (ref. the clown quoted in this post hallucinating patterns that have not even appeared yet for gold to 3000+) you should find a big rock salt crystal and chew on it until the urge to be compelled by said man subsides. That is what I did with my own inner man who stares at charts; quieted him down right good on INGN!


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