It appears that instead on going down the market is content to consolidate recent gains by moving sideways. That doesn't mean that we won't see a more significant pullback in the near future, but it certainly doesn't look like the market wants to go down. The VIX and the QQV look poised to move lower, which should support a continuation of the rally.
Some stocks are setting up to breakout while others are nearing intermediate term tops. BWLD appears to be wedging up in a 5th wave. It would take a strong move above 50 to contradict that view. 50 is the point where the current 3rd wave would become the shortest wave, a violation of elliot's rules. Any spike above 46 that reverses on high volume would be a sign to exit long positions. Another reason to believe that BWLD may be topping is that CMG is in the middle on a long base building process and may be turning down in a wave C soon. If you already have a position in BWLD, one way to deal with this would be to exit on a reversal below 50. If BWLD subsequently breaks out above the reversal high, then re-enter the position. If it breaks down, then your out. If it continues higher without a reversal, then hold.
STAR may be attempting to break out, but this may be a b wave which means a retest of the 9/14 low would be expected. Nevertheless, I am long from 26 with a stop at 21.85. Yes, that is about a 4 ATR stop, just below the .618RT of the right side of the base. I have found the trend is easier to ride with wider initial stops of at least 3 ATRs. Just adjust the position size accordingly.
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9 comments:
That Q’s made a NH (for the March rally) yesterday morning & then AGAIN later yesterday afternoon (on an otherwise down day) was a good sign. Thought that bodes well for later Tues/Weds thru end of month. On schedule.
"With regard to STEC, I think it will build a new base here and move higher in a few weeks."
August 9, 2009 11:11 AM
Although STEC didn't wait to build a new base, that was a great call. Hope that you took advantage of it.
What do you think now ? I can see a potential H&S top forming with/after a rally up to 36 area (downside gap). I think it may be a "broken" stock until next spring.
Betw now & then it NEEDS to build a base.
I agree that STEC is broken for months now. It looks like wave 3 is over. Using the guideline for wave 3 retracements to the 4th wave of lesser degree, we would expect the correction to at least enter the 21.43 to 26 zone. Using the fibs, we would expect a retracement to the 23 to 27.50 +/- zone. The main thing to avoid here is trying to go long on the first bounce out of the support zone as that is usually a false rally. Waiting for the retest of support will yield the best results. However, this will probably take a long time given the steepness of the initial selloff.
I did not take the trade because I thought the base was too short. If I had time to follow on the 30min/60min chart it would have been an interesting setup for sure.
I think this is one area that many traders have trouble with because they are trading the wrong time frame. There were 3 good trades on the 60min for STEC, but unless you were going to exit half or all at a fixed target, most would have given back a lot on the daily. If we can learn to let the trades come to us, it will be easier.
I think I will be looking to short STEC on wave C if it looks right.
As an example I am currently short wave C of AIPC, but I had to wait over 4 months for the setup. Hopefully, it will not stall at the 200dema which it hit today.
Conversely, many months after a losing short trade I am looking to go long STRA.
One thing i forgot to mention is several bloggers have mentioned that during this decline that there is "a great deal of interest" (being expressed) in STEC. That tells me that there are a lot of trapped longs.
Fundamentally, it's interesting how quickly the outlook changed from high margins to competitive problems, but that's the way tech can be. High margins attract competition. Start up times are not like building a new oil refinery.
An "Alex" asked TL "ALTERNATIVE METHOD: ... placing the terminal date on A-D T @ 9/21 -- three weeks into September."
TL addressed this directly, "...but it looks to be near the end of the month."
Certainly didn't act like it today.
Today still feels premature (to the downside) although it was fairly powerful. I would think Monday's low 42.16 would be too high, too soon for support.
Today's NH's were 319 & 140. Do you know if those are the new high water mark ?
Appears that new highs were lower than the previous peak. Don't have exact numbers, but definitely a negative divergence.
One thing that had me fooled (to not sell the high) was the strength in SMH. Until we fell apart, SMH looked like it might close @ a NH.
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