It is important to know why you are buying a stock, is it for technical reasons, fundamental reasons, or a combination of the two. If you bought a stock for technical reasons, then you must adhere to technical breakdowns. The last thing you want to do is purchase a stock on technical grounds, then when the stock goes against you; you start reading the company’s headlines, the 10k, who major holders are, etc,. Basically selling yourself why you should avoid taking a loss (take the loss).
There is a big difference between a company and its stock. In the short term, the stock can trade at a tremendous disconnect to the company’s prospects. I believe that most investors at one point or another used technicals to buy stocks, but shied away from them when they got tired of taking losses. It takes a lot of discipline to sell when stocks break down. A majority of investors hold on to losers hoping that they will come back, the minute they sell they realize that all hope is gone. By holding on they keep the hope alive, and in a bull market most of them will get bailed out, but not so much in a bear market.
Selling yourself on why a stock is a good company after you bought it for technical reason will only put you more in the hole and in a death spiral if we are in a bear market environment. Some stocks never come back. So before you buy a stock, write down the reason why you are buying it. If it’s for technical reasons, then sell it when it breaks down. If you are buying it because you like it fundamentally, then every pullback should be a buying opportunity until the thesis changes. Just make sure that you are not just a headline fundamentalist like most people are. If you are, then you will have absolutely no conviction whatsoever to add when the price comes in, and you will be a seller at the worst possible time. And yes, in a bull market all your sins will be forgiven, but in a bear market you will be toast. Don’t be a technical buyer and a fundamental holder.