Wednesday, July 6, 2011

The Beat Goes On...

Following a tremendous week last week, the market has put in another impressive performance this week, albeit in a completely different manner.  I discussed in the weekend video that the perfect scenario this week would be for the market to rest for a few days, giving very little back to the downside but allowing the overbought conditions to work themselves off a bit.   For the most part, that's what we've seen.   I really would have liked for the Nasdaq to come in a bit (it hasn't) but the charts of the S&P and Dow are very bullish.   Another day or two would be beneficial as well because many stocks are very extended here, but so far, so good for the bulls.

That being said, as you can see below we are at the top of a five-month trading range and it is not impossible for the market to roll over here and form a massive head and shoulders pattern.  I am not expecting it, but you always want to be ready.   Given the move we have made the past two weeks, I did start a hedge via QID today and have a watchlist of shorts (DECK, SINA, SOHU, BEXP, and some others) ready to go.   Hopefully I won't have to do anything with that watchlist, but you always want to be prepared. 

S&P 500

I've been long since last Friday with a few names (QTWW, MOBI, YOKU) and added some more names today (FLT, DANG, LAD, MOBI).   I closed my first MOBI position today around $9.76 for a 30% gain as I planned on selling it around the 50 day MA, but given the strength it showed bouncing back in the afternoon, I think there might be one more day of momentum so I went back in for a short-term trade.   All of my trades are listed here - I try to keep them as up to date as possible. 

Here are some names to watch from here.   We're still in a good environment for buying stocks but just don't get complacent.  If you have a position really taking off, there is nothing wrong with taking some profits as it moves.   Be alert to for this market potentially turning soon.  As long as it acts like it has the past few days, then there is nothing to be worried about, but it is the summer, and summer trading can be tricky and volatile, so always be prepared.   Good luck Thursday. 

All Charts from Telechart, Courtesy of Worden Brothers, Inc.


Dan said...

Hi Ryan! could you post the old charts of the Overbought/Oversold RSI back to 2007 time frame? Thanks.

Mac said...

Hi Dan. I would but I can't because I came up with this indicator earlier this year just kind of brainstorming different ideas. I keep track of the numbers each day in Telechart and then graph them out. I don't have a way of backtesting with Telechart (unfortunately).

Jeremy said...

Mac, I can't thank you enough for what you have shared in this blog. you even posted your trades. Even many paid services didn't do that. Thanks a lot

Mac said...

Thanks Jeremy - hope it helps.

Jeremy said...

Hi Mac, just wonder, do you trade with margin? if yes, what is your strategy? I mean like do you use margin only when the market is confirmed bullish as per your indicators? thanks

Anonymous said...

hi mac
not a good day, the early open gap-up makes not much room for making money from longs. i still prefer the dayopen with consolidation rather than a 60~80pts up.

as at 2:52 dow at 12748, its not a normal overbought rite now. my calculation shows that if it hits 12800, extremely overbought will be achieved.

mini me