Tuesday, July 20, 2010

Qs Headed Higher

The market still has some work to do, but the recent buy signals are still in force as the Qs reversed at the 50% retracement level of the July 1 to July 14 rally. A number of stocks are showing bullish patterns. TXN, mentioned yesterday, reversed off of cited support and looks ready to head higher. So far, the response to Apple's earnings has been positive, which should provide additional support for the rest of the week.

I did get stopped out of SNDK this morning. I "knew" that as soon as I was stopped out, AAPL would be up on the earnings news and SNDK would be too. It is trading at 43.10 after hours after hitting a low today of 39.45. However, the inability of SNDK to hold its July 1 low is not a positive development and it will probably trade lower after the current rally is over.

The fact is that we never "know" anything with respect to the market. We are only "speculating". In general I do not touch stops unless there is a market impact on a stock that would lead to a probable reversal. By that I mean some kind of extraneous news or other event that is causing panic selling. After establishing a low on that type of event, the stop can be placed under that day's low. We are trading probabilities, and getting stopped out of one trade doesn't mean anything in the long run.

The key is to keep trading the strategy according to your plan, and it will work out over time assuming the strategy has a positive expectancy. The MACD has given us two buy signals since June 1, and I believe we will soon see the positive results. Imagine all of the worry and hand wringing that has been going on with many traders and investors. Yet, all there is to do is to follow the signals.

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