Wednesday, October 12, 2011

Gameplan Remains The Same - Wait for Consolidation and Then Reassess

I'll be honest - it's kind of sucked sitting out the past few days in the market as this melt-up/rally (not really sure which one it is yet) continued without even a hint of rest.  It's not that I haven't tried playing this rally - I was in TNA on both 10/3 and 10/4 but got stopped out the same day.   I went into CPHD on 10/4 (the bottom) but it did nothing.   I was in JVA from $7.75 on 10/5 but was also stopped out the same day.   Poor trade management on my side I guess, but it's not like I wasn't bullish at the right time.   Believe me, the past week was not fun when I look at where those names have moved to without me.  

All of that being said, it is important to be disciplined when trading, and I've resisted chasing stocks to the upside the past week.   I may have missed out on some gains, but buying a market up four or five days in a row is just not something I do.   If 10/4 was a legitimate bottom, there will be plenty of opportunities to make money.   Right now, I just don't see that many on the long side.   Rest is needed.  

The market did seem a bit tired late in today's session and that is not unexpected.   This has been quite a vertical run and as I've said in my last few posts, healthy markets consolidate as they move up and digest their gains, allowing more gains to be tacked on easier.   The Nasdaq gapped up again today (two out of the last three sessions now) and put it in a bit of a reversal bar, although it was certainly not a major one.  The chances of a pullback are high here, but we've been saying that for a few days now and it hasn't occured.  

As I go through my scans, I continue to see a number of really appetizing short setups.   Not only are the setups nice, but they are also concentrated to the former leaders from the 2009-2010 bull market - names like GMCR, BIDU, SINA, FOSL, LULU, CROX, and SFLY.   This in my opinion is NOT a good thing.  If these setups are confirmed soon, I think it sends another signal that the bear market is still on and caution is warranted.

Charts from TC2000, Courtesy of Worden Brothers, Inc.

If we do get a pullback/shakeout soon, I am not saying this rally is over.   What I am saying is that it is important to watch how stocks act when/if a rest comes.   Do the new leaders (names like STMP, PSMT, SIMO, MAKO) hold up well?   If they do and the market can hold onto its short-term moving averages, then I will likely look to buy a pullback here.  If a pullback occurs and things get nasty quickly (as it did on September 21 and 28 for example), then you know the drill.   We'll just have to see what happens. Tough market to call at this particular juncture.  Good luck Thursday.

1 comment:

Anonymous said...

hi mac

morning always give a good profit on long, white afternoon sucks (so many overbought adjustments).

may be we skip the afternoon section. btw, i know it doesnt look good on the 30/60min charts but we dunno when will it perform a big swing down.

still stick to the long side atm.

mini me