Tuesday, September 21, 2010

State of the Stock Market - 9/21/10

A volatile day today on Wall Street (as Fed days usually are), as stocks rose sharply when the announcement came but then fell just as sharply and ended the day basically where it started.  Outside of the final two hours, the action was quite slow and probably not worth commenting on.   Actually, since it usually takes a day or two to get the true reaction from the market in regards to Fed days, maybe even the final two hours aren't worth analyzing too heavily.  We'll have to see how the market responds the rest of this week.

Technically, nothing has changed - we are very extended and ripe for a pullback.   The former resistance that was broken yesterday should theoretically act as support, so watch 1130 on the S&P and 2305 on the Nasdaq as key areas.  A lighter volume pullback to this area would be absolutely ideal and should be buyable, especially if it was slow and lasted several days.   What is ideal rarely happens, however, so be on guard.   Anything is possible after the sharp run-up we've seen.   The only reason I would not buy a pullback was if volume was very heavy on the selling and those support levels just mentioned were sliced through like warm butter.   Then I would reconsider, but up until this point, the move has been very bullish and there is no need to think it is over.   Heck, we may not even pullback given the way the past week has gone.  

I made my first trade in a while today, entering CVGI at $10.51 at the open.   This was one of the few stocks I watched that was not extended and also flashed a pocket pivot buy on 9/17.   Fundamentals are decent and the chart looks like it could be forming a potential bottom of a base here.   This one trade might not seem like a big deal, but to me it is, because it was my first as what I now have to be - an end-of-day trader.  

It is tough to just set an order and not know if it is filled or not.  It is extra tough to not know that you have a stop loss in place if your order was filled to protect yourself on the downside.   I've traded that way for so long that not doing it is more than difficult psychologically.   I know, however, that this is something I have to do and in the long run, (assuming my adjustment goes OK) it will probably make me a better overall trader.  One of my weaknesses is letting intraday noise get to me too much and affect my positions and trading EOD makes it hard to let that happen.   We'll see how it goes. 

Overall, I still think a pullback is coming sooner or later, and you must be prepared for it.   Don't chase stocks that are overextended.  If you see stocks that look like they may be going parabolic (VHC, MIPS, and RVBD come to mind), don't be afraid to take profits.   There are stocks out there that are still basing, but not that many.  Patience is a virtue in trading, and unless you are already long from a few weeks ago, it is probably wise to demonstrate patience at this point.    Good luck Wednesday.

1 comment:

bmbull said...

Sounds like you need a broker that supports the 'One Triggers Other' order type to enter your stop for you after your buy order gets filled.