Sound Bases Still Scarce
This market still has at least weeks
to go before we’re likely to get a proliferation of sound bases for the
intermediate-term trader. And the breaks into new high ground are coming on thin
volume.
For example, Apollo Group
(
APOL |
Quote |
Chart |
News |
PowerRating)
rose 2 3/8 to a new high of 53 7/8 on volume of 776,400 shares, 35% below its
usual trade. If the stock is going to trade light at these levels, I would
prefer, if I were long, to see it drift lower. New highs on light volume are
vulnerable.
Express Scripts
(
ESRX |
Quote |
Chart |
News |
PowerRating) is trying
to complete a double-bottom base. The gains on the right side lack volume. We
need to see trading activity pick up on the up days — ideally, a few
accumulation days that also deliver above-average volume. For more on the
interpretation of volume, see my lesson my lesson Using Volume: The Key to Price & Liquidity.
All stocks, of course, are risky. In
any new trade, reduce your risk by limiting your position size and setting a
protective price stop where you will sell your new buy or cover your short in
case the market turns against you. For an introduction to combining price stops
with position sizing, see my lesson,
Risky Business. For further treatment of these and related topics,
check out the Money
Management area of TradingMarkets’ Stocks Education section.