Time for a change of strategy
The market has had two impressive days in a row now. Breadth
has been good, price movement has been good, volume ok, and resistance levels
have been breached. I am also starting to see some stocks break out on the long
side. I have been bearish for a long time now, but it’s starting to appear as if
the market disagrees with me. When the market and I have a difference of
opinion, I listen to the market. Therefore, my trading bias has now moved from
bearish to neutral. I still am not convinced that we have the makings of a
strong move up. I still believe the June/July lows will be breached sometime
this year. But a rising market must be respected.
I am now looking to buy breakouts and take long trades more aggressively. I am
now going to give them more of a chance to work. I am now going to take partial
profits on smaller pieces of my winners and allow more of my long positions to
run.
Short trades will get less benefit of a doubt. A larger portion of my short
position will now be subject to partial profit taking when it goes in my favor.
I will favor shorting pullbacks from lows near resistance over shorting
breakdowns.
These are some of the necessary adjustments I make when my trading bias changes
from bearish to neutral. My strategies remain the same. My willingness to take
trades (always) remains the same. The changes all have to do with my positions
sizing, risk tolerance, and willingness to let profits run. All changes are
subtle, but over the long run, even small changes can make a big difference.
Best of luck with your trading,
Rob
For those who may be looking to expand their
knowledge beyond just market timing, my
Hanna ETF Money Flow System utilizes the VIX in generating trading
signals for spread trades.
Rob Hanna is the principal of a money
management firm located in Massachusetts. He has spent the last several years
developing and refining methods for trading in stocks across multiple time
frames. He selects stocks using both fundamental and technical criteria, and
then trades them using technical analysis techniques.