Hi fellow traders and investors. For those of you who follow Investors Business Daily (IBD), the market is once again in rally mode. Todays market was up by 1% on volume that was higher than yesterday's volume. Therefore it was named as a "Follow Through" day according to IBD's definition. Did you know that the market closed higher each of the last four days? Each day the close was near the high for that day. For now, it appears that we are now in a nice uptrend, which we hope will continue.
We should still be cautious about entering new positions because a confirmed uptrend does not give us a high probability that the market will continue higher at this time. Although we would like to have an 80% to 90% probability that the market will continue to move higher, the probability of a continued move up is closer to only 60% even after the market has entered into a confirmed uptrend.
A couple of stocks that I find interesting on the long side at this time is GS and TSLA. I favor the use of calls for both for directional trades so that we get more "bang-for-the-buck" instead of outright purchase of the individual stocks. Goldman Sachs Group has been building a base for several days now and seems to have found support around $160 after a pullback from a high of $181.13. Using fib values of 50% and 61.80%, GS could continue up to $170.50 to $173 before much resistance.
Tesla Motors broke out to a new high today at $202.20. This could continue up to fib 127.2% which would be around $220 before it some resistance. However, you need to be cautious since earnings will be announced on February 19th after market close. Many of us prefer not to hold a position through earnings unless we currently have at least a 10% profit in the position. You will need to decide if you want to hold or close your position on or before Feb. 19th.
Until next time, learn, profit and enjoy,
Trad
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