Muted Action

Today's action was rather muted after yesterday's breakout, but the intraday pattern points to at least one more push higher before any significant correction appears. Wednesday's tend to finish flat, erasing morning losses or gains by the close to end with little change. Perhaps we will see a morning push higher followed by an afternoon selloff.

Today I was stopped out of short positions in STRA and APOL. The losses on each were less than 1% of my account although the initial risk was greater than 1%. More and more I see the benefit of sticking to a trade until I am taken out by the trailing stop or the position reaches expected target zones. So far this year I have taken early discretionary exits on a couple of positions. Those positions eventually went on to be profitable, and I would not have been stopped out. Last week I exited my long position in YHOO because it had not gone anywhere for some time, I was concerned about the market topping out, and I had a small profit. Well, of course, it is up 10% since then. If you are using a system that works, being stopped out is a good thing. It means capital is freed up to be used on new positions.

In that regard JNPR looks as though it may have completed 5 waves up. Look for a lower swing high with a minimum of two higher lows on either side of the intervening swing low and a break of the lower trendline for a short entry down with a target around 19.

The most important thing is to only take a position to begin that has a good reward to risk ratio, that has excellent upside or downside potential. Recently, a stock mentioned in IBD was nearing a buy point, but some analysis showed little potential upside so I passed on the trade.

If you did not go long this market, like me, at the recent May lows, be patient and wait for a good entry in either direction. It may take a few days, but it will come.