Tuesday, March 2, 2010

One More Swing To Go

As long as the Qs remain in the wave (B) channel it would be hard to argue that the current rally off of the 2/5 low is impulsive, particularly given the clear running triangle. However, so far we have completed only 5 waves and we should have either 3 or 7 for a corrective move. This leaves [b] and [c] of Y to go. If the Qs make it all the way back to the January high, we would need to consider the entire correction to be a flat or expanded flat, which means that the decline from the January high would be a 3 wave movement. The labelling for the decline is open to that interpretation, so we will be left with either a triangle or flat. Only time will tell us which it is going to be.

The main point though is that the current up move is corrective, which means there is more downside to come. If the January high is tested or exceeded, we can be sure that once wave (C) is over, the bear market rally will continue to new rally highs.

The type of action I was talking about last night occured today with a number biotechs popping higher. This is not bear market action. SQNM, QCOR and OSIP have made big moves. I own the first two. I have mentioned QCOR on this blog many times in the past. I don't like it as much now as I did two years ago, but I do think it has a chance to hit $20. The pattern in SQNM lends itself to new all time highs above $30. These are vey speculative stocks and it may take many months for these targets to be seen. I found QCOR using a relative strength screen during the middle of the 2008 decline. SQNM appeared to have a climax selloff last year, which now seems to have been the case.

My favorite speculative trade, KKD, is close to completing 5 waves up from its 1/26 low. The action marks it as a bear market stock. It has been going up as the market went down. So far, KKD is either working on a very large double zigzag targeting the $7.50 to $10.00 zone, or a (1), (2), 1, 2, [i], [ii] buildup for a power 3rd wave move that would propel it to its all time high. We should know by mid-summer which way it is going to go.

I recently took a small position in YRCW. This is basically a call option on the survival of the company. I like the CEO's willingness to fight the powers that are trying to take down his company, and I think he might be able to turn things around.

Be prepared to exit short term long positions early next week in anticipation of the wave (C) decline. I don't think we will see much more action this week ahead of the employment report.

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