Mind you, Bill Gates and the boys have never kept me awake at night.

That is, until last week, when they provided me with my worst trading loss since this column began.

I'm talking about my unfortunate short of Yahoo. The news that Microsoft is interested in acquiring the one company that I happened to have a short position in caused the Yahoo share price to go through the roof last week, costing me the guts of 2,300 in the process.

I had shorted Yahoo near $29 and was pretty relaxed about it.

Technically, Yahoo was looking pretty iffy. I couldn't see any fundamental catalyst either . . . after all, the stock had reported mediocre earnings just weeks previously. My stop loss was at $30.50. With each one-cent move in the stock being worth 5 to me, I was looking at a maximum loss of 850 or so.

Instead, the Microsoft news caused the stock to open for trading above $33 and I was greeted with a big, fat and utterly unexpected loss.

This is the second time in the past few weeks that a stock has gapped above my stop loss (it also happened with a short of Amazon recently, although that was a more minor affair). It didn't happen once over the previous six months, so it's fair to say I've had a little bad luck recently.

My trading methods are designed to prevent such occurrences . . . that's why I exit positions ahead of earnings announcements and the like. Unfortunately, you can never guarantee against such matters.

Unexpected things happen in the markets, as I discovered last week.

Anyway, I don't blame myself . . . it was a perfectly good trade . . . but that's not much of a consolation. To make matters worse, the stock gave up much of its gains later on in the day after rumours went out that Microsoft was looking for a simple advertising partnership rather than an acquisition.

In my younger days, I'd probably have pulled my stop loss order and hoped for the best. Doing so would have resulted in greatly reduced losses in the Yahoo case, but make no mistake . . . newbie traders who trade without stops are asking for trouble. You'll get away with it on occasions but eventually the market will give you the mother of all hidings.

My only other trades last week were a trio of long day trades of the Dow on Tuesday and Wednesday, all of which garnered some modest pro"ts. At the moment, every single dip is being bought. My strategy has been to buy into morning weakness, particularly if there is some kind of technical support nearby.

I'm not going to get rich with these day trades (the bets have been small) but they have been the source of a few quid over the past fortnight and, more importantly, have provided me with some muchneeded con"dence. I never feel like trading after a string of losers. The occasional low-risk day trade helps me ease my way back into things.

There haven't been any earthshattering developments in the markets over the past week. The Federal Reserve elected to keep interest rates unchanged on Wednesday. No surprise there. The accompanying wording didn't contain anything too earthshattering either, although that didn't stop the markets going loco in the immediate aftermath.

I always enjoy watching the markets in the minutes after Fed decisions are announced. The Dow had traded in a narrow 60-point range all day. As soon as the Fed announcement was made, it dived a full 60 points within minutes. It then reversed back upwards, jumping 70 points (again in a matter of minutes).

Then we saw another 50-point dive before the bulls "nally won out, with the index surging another 60 points and closing near its high of the day.

There's no doubt that the bulls are in control at the moment. The only technical red light I'm seeing is that the number of stocks making new highs is decreasing. For example, over 80 stocks in the S&P 500 made new highs at the end of April. By last week, that number had dropped to 49. It's a similar story with the Nasdaq and the Dow. This implies that a dwindling number of stocks are doing most of the leg work.

It doesn't mean that a correction is imminent, however. The recent rally is losing steam but that may be followed by a period of consolidation rather than a swift breakdown. I'd love to see some decent selling, but I'm not holding my breath.

To repeat what I've been saying over the past few weeks; this is not a time to be getting aggressively long or short. The market is extremely overbought but things can stay that way for a while.

In terms of individual stocks, I'm looking to buy into Amazon if the stock can break above $64. It's technically overbought at the moment but the chart suggests that a break above $64 could see another leg higher. Alternatively, I would look to buy on a dip to the $60 area. Elan is another stock that has been strong of late and I'd buy on any pull-back to the $14 area.

As for Yahoo! , I'm trying to forget about it. These things happen. It would have been a lot worse if I lost my discipline and pulled my stop. As Jesse Livermore (one of the great traders of the early 20th century) put it, "A loss never bothers me after I take it. I forget it overnight. But being wrong . . . not taking the loss . . . that is what does damage to the pocketbook and to the soul."

"Forget it overnight"? A bit optimistic, maybe. Give it a week.

Weekly gain/loss: . . . 1,700 Overall balance: 37,700