What You Should Do In A Momentum Market
On Thursday, the Nasdaq lapped lower on the open but
quickly found its low and generally worked its way higher throughout the day. This action has it closing well
and at fresh highs for the year once again.
The S&P put in a somewhat similar performance but
wasn’t quite as strong as the Nasdaq. Nevertheless, it too managed to close at new highs for the year.Â
So what do we do? This rally is amazing. It’s almost as
good as the good ole days. You know, back in 99/early 00 when you couldn’t wait
to wake up to see how much you made overnight. It’s scary but I don’t think you
should look a gift bull, ah, I mean horse, in the mouth. Continue to enjoy the
ride but take partial profits as they are offered and trail a stop. Said another
way, DO NOT hold on for top dollar. This way, you are at your lightest when the
correction does come. And believe me, I can assure you, it will! On new
positions, continue to keep ’em light. And, since the market hasn’t corrected
yet, make sure you are only trading in those issues that already have.Â
Looking to potential setups, Cima Labs
(
CIMA |
Quote |
Chart |
News |
PowerRating),
mentioned Wednesday night and in the
strong drug delivery sub-sector, still looks poised to resume its accelerating uptrend
out of a pullback–a setup I have dubbed “Accelerating Momentum
Strategy” (AMS).
WCI Communities
(
WCI |
Quote |
Chart |
News |
PowerRating) looks like it has the potential
to resume its persistent uptrend out of a pullback. However, make sure you use
proper money management here (those things discussed in this column and in my
articles), since the
homebuilders (a) are getting pretty frothy in here.
Smoke ’em If You Got ’em
Encana Corp.
(
ECA |
Quote |
Chart |
News |
PowerRating), in the strong independent oil &
gas sub-sector(a), has moved up nicely since first mentioned (b). When blessed
with such a nice, quick profit, make sure you lock in a piece and tighten your
stop to breakeven.Â
Â
Email Of The Day
I want to emphatically THANK YOU for writing the Swing Trading book. I read it last winter (finally!) and started implementing your ideas early November. I more or less treaded water to the low in March (I made maybe 5% in that time), but its been onward and upward since that mid-March low.
Three big points:
a) the money management side of this is huge. Its nice to have a life again and not be tethered to the screen.
b) stressing the stops is very important as well. I have begrudgingly come to embrace this, but now that I have its vital to the routine. Each stop out forces me to reassess the market situation freshly, and just having to do this discipline alone has saved countless dollars and grief (I’m somewhat surprised you
didn’t stress that benefit in the book, the “reassessing”).
c) I like your mindset and coverage on the different setups you trade, and have incorporated some of it. My approach is a little different in that I generally look at a lot of charts and assess
“what’s been working, what’s not, in this market” and try to trade the charts that have been working. But your setups have a good common-sense aspect to them, hard to argue the logic and good for me to have another tool in the arsenal.
Frank S.
Best of luck with your trading on Friday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“….. thanks for writing your simple,
informative, and easy to understand swing trade book. It was very helpful to me in many ways…..
Larry S.
Â
