Saturday, September 8, 2012

Stock Market Outlook - "Ride the Wave as Far as It Goes" - 9/8/12

If you haven't made any money over the past two weeks, you need to reassess your trading strategies.  Personally, my account is up about 15% from where it was a month or so ago.   That's not because I am some "master trader" or anything.  We are simply (finally) seeing a market where individual stocks have acted much better.   I know many bloggers will brag about how many "winners" they posted on their website or Twitter or Stock Twits right now, but the reality is that it's been a "shooting fish in a barrell" type market at least this past week and in some cases going back to two weeks ago.  There have been tons of setups (I've shared many of them) and most of them have worked well.   I am hopeful that this action can continue because this type of market is really where you can grow your account quickly.  Unfortunately, these periods usually only come a few times per year so you must take advantage of them when you can.  

In terms of where the market is right now, a little rest/consolidation would not be a bad thing at all - it would actually be beneficial here in my opinion.   That doesn't mean that it will happen.  The S&P closed at new highs for 2012 on Friday, but is a little extended and could use a slight rest.   However, an underwhelming jobs number on Friday following a huge day Thursday looked like a recipe for profit-taking and it didn't happen.  A squeeze could continue.   The 1425 area now becomes a key level of support for the S&P.

The Nasdaq finished flat on Friday, but again given the circumstances, I thought it was a very bullish day.   It felt consolidation-like in nature and I actually continued to see many stocks act well under the surface.   Since we are right at new highs for 2012 here, a pause could make sense.  I'll keep watching the nine day EMA like I always do as a key level of short-term support - even if we pullback here, things will be fine as long as the nine day holds.  

I am currently holding three longs into next week and am gradually moving to more of a swing-trading mindset now from my day-trading mindsight of this summer.  (All of my trades can be found here - updated daily).   That strategy was out of necessity - the summer was so choppy that you had to take gains when you had them.   I now see stocks acting much better - smoother might be a good term - so I am willing to hold them longer.   I wish I did this earlier as I look back on my trades and see a few stocks that I sold too early (RPRX from the high $9s sticks out).   That's all part of trading however.  You realize early in this game that you are never going to be perfect and learn to just accept it.   We do now however seem to be in a better market so it might be worth holding things a bit longer as long as stocks keep acting well.

Although I would like to see the market rest a bit, there were still a few stocks in my scans yesterday that have yet to breakout.   I'll take them if they trigger, but I also realize that since they haven't moved yet, there is more of a risk of them reversing.   If it happens, I'll just get out and move on.

All Charts from TC2000, Courtesy of Worden Brothers, Inc.

I have a few others on my watchlist for Monday (SRPT, GWRE, YELP, CBM, RDEN, MM) but they are more volatile or thinner so I am just kind of watching them and will go by gut feel if that makes sense.  Overall, this appears to be a much healthier market than we've seen for most of the year and as long as it continues to act like this, money can easily be made on the long side.   I do know September is traditionally a very bearish month so if we see heavy selling or those short-term moving averages break, my outlook will change.  Going forward, however, ride the wave as far as it will go.   Good luck next week.

1 comment:

Anonymous said...

Good article. I liked your comment about the "fish in a barrell".