Tuesday, January 18, 2011

State of the Stock Market - 1/18/10 - "Good Action But Be Careful"

Good action overall today on Wall Street, as stocks put a bottom in early on in the session and bounced from there.   The Steve Jobs news caused AAPL and the Nasdaq in particular to fall early, but the recovery was impressive, with the Nasdaq finishing up 10 points even with AAPL closing lower by 2%.   Volume looks like it will be heavier.

Technically, we remain in a very strong uptrend, but my gut is telling me we are getting to a point that a quick, sharp selloff could be coming soon.   My gut has been wrong many times so who knows, but I do think we are a bit extended and could use some rest soon.  Basically, I don't know if I would be entering into many new longs at this juncture.   If we get a few days of consolidation, then I think we're back to buy mode but right now, I think being a bit cautious is smart.

Although the market acted very well today (the Nasdaq in particular), I also don't like the way some of the stocks I have been watching acted today and as such, it's another reason for me to be a bit more cautious at this juncture with the overall market.   Names like TDSC, WYNN, BOOM, SCSS, VIP, and YOKU did not act well today and that is a small warning sign to me.  

All of my signals remain on "buy", but I took profits in one position this afternoon (sold MGIC at $8.33 for a 15% gain after entering at the end of Thursday's session - mentioned this chart here and here.)  I entered one new position this morning off of a "Breakout Candidate" signal from Friday, but it reversed and closed flat and I don't know that I will be holding it much longer.

There is one name that appeared on all three of my long scans today (and that's a good sign) so I may look at that name but overall (besides solar stocks, of which I am already long) there really wasn't anything else of interest in the scans.  That is also a bit worrisome.

Chart from Telechart, Courtesy of Worden Brothers, Inc.

Overall, I still have five long positions, but my stops are set so if we do see a pullback, I will only be taking a small loss on one of them.   There is only one position right now that I am really willing to let pullback a lot, as I am up 33% in this name and bought it off of a bottoming pattern, not a breakout pattern.   One of the reasons I sold MGIC today is that it has already had such a big move from November to now that I think a reversal is much more of a possibility in this name so it was simply more of a short-term trade.   If we see another big move up tomorrow, I may look to take some profits on other names I have.

Thank you to those readers that sent emails or left comments about this weekend's post.   I don't know where I will be going from here, but it is something I am just going to think about as time goes on because I have some conflicting feelings so we'll see what happens.   Take care and good luck Tuesday - it'll be interesting to see if this market does rest or just keeps chugging into higher ground.

1 comment:

Summit said...

Thanks again for all you do! Anne