KoosKanmar

$JSESAP Sappi. Important to take note of fake breaks

JSE:SAP   SAPPI LTD
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Sappi broke a defined channel to the upside last week, followed by a fake out and break back into the channel. It is important to take notice of fake outs like this because it usually results in a selloff as a result of trapped longs positions. People buy the breakout in anticipation of a good move upwards (many times with leveraged positions) and when the share turns they are trapped in their positions. Trapped longs will many times sell at market to cover any losses. Even when a the price of the market moves up a little they sell to also cover losses. It creates sell momentum that can last longer that most think.

Stop losses in events like this can save you a lot of pain.
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