Never Settle For Less
In the movie
“Wall Street,” Gordon Gecko (played by Michael Douglas) says:
“Mixed emotions, buddy,” when referring to a deal that he was unsure
about. I brought this up because the same thought is going through my head, as I
try and decide what to make of this market.
Yesterday’s follow-through on the
Nasdaq and S&P 600 was for real. They both qualified under every letter of
the rule: A 2% increase in the index on heavier volume than the day before…done.
The evidence is in and that is how we must take it.
The issues that keep me wondering
really don’t have much bearing on what I decide to do, as is always the case
under a complete set of rules that have been proven to work. One thing
that bothers me right now is that the S&P 500
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massive rallies, but were not even able to produce solid volume to back the
moves.Â
Secondly, and most important, there are very few stocks poised to offer
“high-potential” entry points. I view these companies as necessary for us to
invest in and make money on. They are equally important to the market itself,
because they provide the all-important leadership that is necessary to take the
market higher.
Yesterday’s Trading Service posted
only one candidate for us to consider. I’m not saying there aren’t others out
there, but the fact remains that buy candidates are not very abundant right now.
Many stocks are forming unique
patterns as a result of the rare Bear market we have all experienced. I have
come across many double-bottom bases where the midpoint is also the high of the
base.
Apollo Group
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example:
Sierra Health
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example:
This type of market produces many
stocks that formed one base or another and then attempted to break out of them,
only to feel the weight of the market once again. At that point, some stocks
retreated to form this unique double-bottom formation, while others held firm to
work through a base on top of their previous base. In any case, it is important
to avoid bases that are too choppy.Â
One thing I can suggest at this point is
going through some charts of past success stories before they broke out. We need
to make sure we can identify a good chart. The past few months and years have
been wrought with a bad market and many of the stock charts have not looked very
good. Unfortunately, this has trained the eye to look for poor charts rather
than good ones. Now it is time to train ourselves to look for the good ones, so
that we do not settle for stocks with flaws.
For now, let the market be your guide.
Right now, it has confirmed a rally…great! Now let it present some decent buy
candidates for us to choose from. It has yet to do that.
Until Thursday,