Stay Cautious
Who wants to be a trader? With the GÇ£Red HatGÇÖsGÇ¥ (see archive from last night) and GÇ£YahooGÇÖsGÇ¥ of the world on fire, everyone is jumping into the trading game. It seems that every day I get calls from friends and associates telling me how much money they are making.
Tonight’s Set-ups
Purchase Pro (PPRO) on the Pullbacks List, is a pattern I call a Trend Knockout (TKO). This is where a strongly trending stock sells off and takes out (trades below) the prior two lows (a). This often GÇ£shakes outGÇ¥ the weak hands and clears the way for the security to trade higher.
Looking Ahead
Wow, what an end to the week! The S&P and NASDAQ hit and closed at all-time highs and the Dow Jones is just spitting distance away. However, IGÇÖd use caution on Monday as the indices did GÇ£tail offGÇ¥ (closed off of their highs).
Pullbacks
There are several stocks on the Pullbacks List that look interesting to me tonight. Hughes Electronics (GMH) is a high level GÇ£miniGÇ¥ cup and handle or if you prefer, a 3 bar pullback from highs (a).
Cup & Handle
Last night, I talked about that fact that the cash S&P ($SPX)had slipped below the 1400 level. Today, it rallied back to just below that level. This suggests that the bigger picture cup and handle is still intact.
Cup & Handle in Cash S&P
Today, the cash S&P ($SPX) sold off, taking out the recent lows (a) around 1400. Going forward, itGÇÖs important for this index to rally from these levels. Otherwise, the bullish cup and handle formation may be in jeopardy.
Reading the CVR Signals
Tonight, we have a CVR III and a CVR I buy signal- one of my favorite combinations- on the Market Bias Page. This suggests an upside bias for tomorrow. However, wait for some confirmation to the upside before getting too bullish as the popular indices were all down today.
Overextended Stocks
As you know, lately IGÇÖve been discussing the fact that many stocks are overextended. Therefore, at the risk of being repetitive, tonight my focus will remain on stocks that are in pullbacks or pullback-like formations.
Light Day, No Liquidity
The day after Thanksgiving is historically a light volume day. This lack of liquidity can often make for difficult trading. Keep this in mind should you decide to trade on Friday. Otherwise take a break, the markets will still be there on Monday.
Lack of Liquidity…Caution
Tomorrow, we will likely experience thin pre-holiday trading. Therefore, use caution as lack of liquidity is the short-term traderGÇÖs worse enemy. In light of this, there are only a few stocks that look interesting to me tonight.
Overbought or Oversold Conditions
Markets can resolve an overbought condition in two ways. They can sell off (correct) or they can trade sideways. So far, the S&P has been walking off this overbought condition by trading sideways (a). However, continue to trail stops tightly on longs and continue to consider some candidates on the short side until this situation resolves itself.
A Word of Caution
Earlier in the week, I was talking with a friend about how easy it has become. I mean, you just find a pullback, cup and handle, breakout etc., put your money down and pick you money up (either later that day or at most a few days later).