Monday, October 24, 2011

Bullish Action Continues, But Be Careful Chasing Here

Today was about as bullish as you can get.   The market started the day only slightly higher but took off like a rocket and gave little to any back throughout the day.   Volume was lower, but to be honest I really don't put as much emphasis into index volume as I used to because it just doesn't seem to matter as much as it once did.   We've seen heavy volume selloffs and weak volume rallies for the past two years so maybe I am just immune to it.  I did see a lot of individual stocks moving up on heavier volume, so that is what I am focusing on right now.  There were winners all over the place - as I tweeted earlier, 13 out of the "final" 22 from the video last night were up over 6% today, including stocks like MOBI (+35%), FIO (14.5%), and YOKU (11%).  Not sure where you are going to find those ideas elsewhere on the web completely for free.

This was one of those days I wish I didn't have a full-time job because it looks like there were a LOT of good intraday entries in these names, but with my job I am forced to enter either pre-market, at lunch, or on a break around 2:00.   Therefore, I was out of luck in many cases and had to enter at less-than-perfect times.   I went into TNA in the pre-market and was able to get a nice gain out of that before getting stopped late in the session.  I was stopped on MOBI late after entering off an intraday flag during lunch - just didn't have enough momo late to push higher.   I am still in JRCC, MAKO, RENN, and one earnings play from after-hours and will ride my stops and see what happens.  

For the third time in the last five days, I found a TON of nice looking setups in my scans tonight.   Too many in fact - I had to do some major cutting to get to a manageable list.   As I did more research however, I noticed that we are overbought in several measures.   My own overbought/oversold indicator is at a very high level, and the McClellan Oscillator (T2106 in TC2000) is up over +300.   The T2108 indicator is also up near overbought levels that haven't been seen in almost four months.  

Charts from TC2000, Courtesy of Worden Brothers, Inc.

This is in no way to insinuate I am bearish here.   Actually, as I continue to soak in the number of nice charts I am seeing with bottoming-type formations, I am wondering if we are in the middle of a major year-end rally that will be more powerful than anyone expects.   I would be cautious however at this particular juncture if you are not already long.   If we get another really strong day tomorrow, I will likely sell into it and wait for a brief consolidation.   Even just a day or two of rest would be tremendous here and allow the market to continue this move higher over a longer period of time.   Overbought can stay overbought and it very well might in this case, but I would be more selective if nothing else at this point because we're stretched.  

We've seen a nice breadth thrust over the past week or so.   I've had more stocks come up in my bullish scans than I can remember in a long, long time the past week as well.   Although this rally is a bit different in that IBD-type names are not really the ones moving, it is a rally nonetheless and until we see some distribution come in, you should remain bullish.   Be careful and very selective in the short-term, but if we do get a light day or two of rest, be ready to go long once again.   Good luck Tuesday.

1 comment:

Clay Franklin said...

Thanks Mac,
I have a lot to learn still and really appreciated last nights video.
Next step will be to put your ideas to work so I can get a return closer to what you get than what I've been getting.
I never used a stop before and it gets me in trouble. I held GOOG from $545 to $480 and back to $591 and sold it for a profit. Not exactly a expert way to trade like you do. So do I hold GMCR into earnings or take the loss now. I expect it will move up to 30% one way or the other on earnings. Didn't work very well for NFLX today. I got a few shares to play earnings, bad idea...
I also tend to play tech names since that is what I know.

Really appreciate your updates.