Tuesday, March 17, 2009

Turning Or Accelerating

This market seems to want to go up regardless of any other considerations and the Qs made a 3 week high today adding to the growing list of buy signals. While I have cautiously added a few swing long positions, and a couple of intermediate term long positions, I will wait for some sort of pullback to add new positions before becoming overly aggressive on the long side. The primary reason being that the put/call ratio is flashing warning signals, but with today's rally completing 5 waves up from the March 9 lows we should expect this rally could continue substantially higher after a brief pause or pullback.

I have mentioned several times that March 17 was a Gann turn date, so a pullback could begin tomorrow, but sometimes turndates become acceleration points. Any acceleration in the uptrend from this point would be a sign that an intermediate term rally is underway probably lasting for several weeks with the primary first target at the 200dema in the major indexes.

While traders might have hoped for the opportunity to buy a retest of the March 9 low, they should not sit on the sidelines as the market powers higher just because the desired outcome did not occur. When the markets explode off of a low, the best approach, I believe, is to enter gradually so as not to become overcommitted to the long side should a sharp correction appear. Any pullbacks can be used to add new positions. However, I rarely buy the pullback, but rather I buy the breakout after the pullback. The SP-500 is approaching significant resistance tomorrow, so a pullback or correction would not be unexpected.

If you have been building your watchlist over the past few weeks, you should have several candidates to choose from for intermediate term positions. I have found that using Marketclub's 3 month/3 week approach for individual stocks to be particularly easy and effective to implement. If a stock is alreay in a strong uptrend, just wait for a pullback to enter and trail a 3 week stop. If you have a nice gain of 30% to 50% exit half (or all of the position) and trail a stop on the second half. Be sure to look at significant fibonacci retracements for exit points.

Check out SOHU, BIDU, PNRA, CPSI, COGT, VOLC, HANS, CSKI, PETS for some possible entry points.

Good trading and remember that price trumps all other considerations. Do let my or anyone else's views about future market action determine your trading activity, but follow the price action and use probable outcomes to adjust your exposure. While many have commented on the potential for another low in the markets (including myself), few have commented on the fact that the Qs are only a couple of points away from a 3 month high, which would be very bullish.

No comments: