My answer was, "I like the company's past operating performance, operating/industry prospects thru 2006, balance sheet, and technical indicators. But I called it mostly a short-term trade in a declining price cycle for Basic Material stocks. I also called it a start to a long-term accumulation in LYO and DOW stock for very long-term investors."

I guess I could have written that I didn't know OXY would sell 11 million shares on Monday morning, soon after my Friday pre-open blog article. But that would be too obvious.

The chart above shows that I would have picked recent trading cycle tops and bottoms that have to be approached differently based on your needs and resources. The arrows are for what I call Intra-Year Traders, i.e., those who would like to make two or three buys or sells in a whole year.

In my case, I would be selling or writing calls (if I intended to continue holding LYO) at the downward pointing arrow, and buying stock or writing puts at the upward pointing arrow. If there happened to be a major gap to the downside at or near the upward pointing arrow, I would be in buying calls.

Every trading situation is different, but the point is that (i) I have already gone through the financials (e.g., current solvency and 3 to 5 year profitability ratios, and the quantitative metrics (e.g., quarterly earnings/cash flow/margin growth rates). I have read the news releases from (or about) the corporation, and the Wall Street analyst recommendations. I have compared the company to its peers in the industry (via numbers available at Yahoo!) and all in all decided this is a company I would hold in a securities portfolio.

Then it comes down to timing, and even my crystal ball can only give me best indication of that.

After the timing decision is made, I lastly have to decide on money management tactics, e.g., stock vs options, and how much stock or how many options and what type. The latter is determined on the basis of what's happening in the equity prices in that sub-industry group and sector and broad market for the day (or that week).

I have a general price objective and time horizon, but usually don't have a formal work-out plan in mind when a decision is made (just in case the trade goes bad). Stop orders (as to 4-6-8-10-12 pct) depend largely on variables such as rate of change in the sector/broad market, beta of the stock, my comfort level for the day, and so forth.

Trading is like a dance; the music changes, the mood changes, and so forth. It's not my party; I'm just a guest, so I have to follow along, and try to act appropriately.

But I go prepared, and hope for the best outcome.