The Psychology of Stock Ownership based on Technical Analysis

Have you ever wondered why is it that when you are looking at a stock to buy and evaluating the charts, everything looks good and screams a strong buy.  But as soon as you buy the stock, and the stock stops moving up, all indicators look like you should get the hell out of your position?   It is the opposing forces of greed and fear that drive this emotion.  When the stock is moving up, greed takes over and everything looks good so you pull the trigger.  If then the stock pauses and stops moving up (even if it goes sideways), all of a sudden the fear starts dominating and everything starts looking negative.  For this reason, you should write down why you entered a position and what is your expected time horizon.   For you can enter the position with a 3 month price target, yet close the position a week later because your "gut" tells you to do so.  Sometimes you will be right, but often you might be wrong.  Case in point, I entered a long position on HIG (Hartford Financial Services Group) around mid July 2009 around $11 per share.  (1000 shares).  I started second guessing myself when the stock didn't move for 2 or 3 days and ended up selling 10 calls for $1.00 each.  Then I watched the stock take off and work its way to $20+ while I netted a measly $1 per share.  Don't get me wrong, I made money, but I missed out on a lot more money I could have made due to the butterflies in my stomach. 

Currently, I am experiencing this effect with CSTR (CoinStar).  I bought it knowing that the move could be small yet rewarding in the short run.  Today when I see the market moving up and CSTR barely registering a move, I start sweating the potential pull back the stock faces once it runs into resistance.  I guess I will have to wait and see how it pans out and whether I decide to sell my position.  I went thru the same jitters with ORBK.  Bought the stock with a longer term horizon and somehow kept myself from selling it in spite of the small pullback and the jittery feeling.  As of today I am up around 8%.  I initially thought the stock had the potential to move to $16-17 which is why I bought it, yet now I find myself wondering if I should take my gains and run.    Such is the battle that goes on in our head, between greed and fear...