Why I’m Willing To Miss A Breakout
Looking to the indices, on Tuesday, the Nasdaq open firmer
but soon reversed and began to sell off. However, it found its low quickly and
began to rally. Then, after trading back and forth, it resumed its rally going
into the close. This action has it closing well, above minor resistance, and
nearing its old highs.Â
The S&P traded back and forth and was only able to hold
on to a slight gain.
This action keeps it in a trading range.
Looking to the sectors, the semis extended Monday’s rally.
This action puts them at new highs. Other strong sectors include retail (with
the exception of home improvement), cyclicals, and gold. On the down side, major
drugs and utilities remain in downtrends.
So what do we do? The extension of Monday’s rally
in the Nasdaq was very
impressive. However, so far, the S&P remains stuck in a trading range.
Further, you can’t completely ignore the low VIX readings (which suggests complacency).
And, the fact the the indices are overbought. Therefore,
one has to wonder if the indices will correct before breaking out. Considering
the above, continue to put together your shopping list in the aforementioned
strong sectors, but wait for a pullback before looking to enter. True, you
might miss some upside but at least you won’t be buying at potentially dangerous
level. mso-fareast-font-family:”Times New Roman”;mso-ansi-language:EN-US;mso-fareast-language:
EN-US;mso-bidi-language:AR-SA”>On the
short side, for the nimble, we could see a counter trend trade soon in the
indices.
No setups tonight. Once (all of) the indices clear
their trading ranges, we should see many stocks setting up on a pullback.
Hey Dave, You’re Missing The Breakout!?!
Since breakouts are prone to failure, I’m not a breakout
trader (not that there’s anything wrong with being a breakout trader!, if you
are one, God bless you!). I essentially look for a trend and then a place to
enter it (usually a pullback). So yes, if the market breaks out, I will miss it.
However, I will look to enter on the first pullback if and only ifÂ
the trend shows signs of re-asserting itself.Â
Best of luck with your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“…..Your book on your swing trading method is succinct, straightforward, clear and above all useable. Thank you for the tools it provides. Please write more. You’re not just another writer, you’re a teacher who makes a difference…”
Michael S.
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