Good Morning fellow traders and investors, we hope that you are having a very profitable day. The shortened week that just ended last Friday began ominously with a market reversal session that caused some consternation for all of us. We don't want to see new highs being made in the morning to have them all given up by the close, especially on heavy volume.
The high volume that we experienced was an indication of institutional selling, but by week's end, the major average had clawed its way back to close at all time highs. Talk about resilience! For our subscribers who follow IBD, let's take a look at the distribution day count.
To refresh your memory, distribution is an indication of institutional selling. When distribution days start to pile up, particularly when you see them clustering over a period of a week or two, you need to pay attention, because that could set the stage for a more severe market sell-off. The Nasdaq has only had two since December 14th, hardly an ominous sign. The S&P 500 matches that number, so we're not seeing tell-tale signs of institutions cutting and running.
Does that mean the coast is clear? No, but it's an indication at this point, investors are in the mood to buy the dips and pour more money into the market. Nobody knows how long this will last, but suffice it to say, it will last until buyers are exhausted. Near tops, you will see distribution days start to occur and they can add up very quickly, so don't be complacent.
I'm seeing some stocks breaking above longer term up-trend lines.
On a chart, connect at least three points going back at several months. A strong acting stock in a prolonged up-trend will often establish these point at intermittent highs. You can draw a line connecting the highs of these points to help identify likely areas of resistance. When a stock breaks above this long term upper channel line, it's doing something out of character. This could be a sign of climax price action, a place where stocks could have a blow-off top.
When you see a stock start to behave in this fashion, watch it closely because studies have indicated that when this happens, stocks should be sold. We recognize human nature being what it is, you're reluctant to sell as long as your stock is going up. Therefore, you might consider selling some and keeping some shares until you see weakness. Just remember, stocks go down a lot faster and harder than they go up, so be happy when you have a chance to unload some of your shares before they top out.
Right now, the trend remains our friend. We currently have the government shut down that might have an affect on the market this week? So far this morning, the markets are up.
Now that this bull market is getting pretty old, it started in March 2009, some of our subscribers are asking us how do we make profits more quickly, not staying in the markets when risks are high? Here's an example of a very quick trade that we took this morning:
The high volume that we experienced was an indication of institutional selling, but by week's end, the major average had clawed its way back to close at all time highs. Talk about resilience! For our subscribers who follow IBD, let's take a look at the distribution day count.
To refresh your memory, distribution is an indication of institutional selling. When distribution days start to pile up, particularly when you see them clustering over a period of a week or two, you need to pay attention, because that could set the stage for a more severe market sell-off. The Nasdaq has only had two since December 14th, hardly an ominous sign. The S&P 500 matches that number, so we're not seeing tell-tale signs of institutions cutting and running.
Does that mean the coast is clear? No, but it's an indication at this point, investors are in the mood to buy the dips and pour more money into the market. Nobody knows how long this will last, but suffice it to say, it will last until buyers are exhausted. Near tops, you will see distribution days start to occur and they can add up very quickly, so don't be complacent.
I'm seeing some stocks breaking above longer term up-trend lines.
On a chart, connect at least three points going back at several months. A strong acting stock in a prolonged up-trend will often establish these point at intermittent highs. You can draw a line connecting the highs of these points to help identify likely areas of resistance. When a stock breaks above this long term upper channel line, it's doing something out of character. This could be a sign of climax price action, a place where stocks could have a blow-off top.
When you see a stock start to behave in this fashion, watch it closely because studies have indicated that when this happens, stocks should be sold. We recognize human nature being what it is, you're reluctant to sell as long as your stock is going up. Therefore, you might consider selling some and keeping some shares until you see weakness. Just remember, stocks go down a lot faster and harder than they go up, so be happy when you have a chance to unload some of your shares before they top out.
Right now, the trend remains our friend. We currently have the government shut down that might have an affect on the market this week? So far this morning, the markets are up.
Now that this bull market is getting pretty old, it started in March 2009, some of our subscribers are asking us how do we make profits more quickly, not staying in the markets when risks are high? Here's an example of a very quick trade that we took this morning:
The above photo shows a 6 minute trade that I took this morning. I had gotten up too early, around 4:30 AM CA time, and was thinking about going back to bed. So I decided that I would look for a quick trade where I have a high probability of taking a profit in 10 to 20 minutes and then go back to bed until later this morning. So, some of us refer to this as a scalp trade. He is the basic concept:
1. Do a scan to find a low price stock that has a "gap-up" in the premarket, Look for a stock priced between $1 to $10,
2. Look at the news for the symbols you find that are of interest to you,
3. Review the premarket price pattern as it forms on the 1 minute chart,
4. Watch for an ideal time to buy the stock within a short time after the market opens based on a price action that you like,
5. Buy the stock, usually a quantity of several hundred shares, and closely watch the price action on your 1 minute chart, and
6. Quickly sell all of your shares when the price of the stock shoots up like a rocket!
That's exactly what I did this morning as shown in the above price chart of Lightbridge Corp. [LTBR].
After doing my premarket scan on my Think Or Swim [TOS] platform, I identified LTBR as a possible scalp trade. I began watching this stock in the premarket on my 1 minute chart. At the open, price tried to move up, but I waited for the first pullback and then bought on the pop up as shown above on the green line.
After watching the price action for a few minutes, I prepared three exit orders as shown in the "Trades Box" shown above. I wanted to take profits on 300 shares quickly, then try to grab some additional profits on the remaining 200 shares. These closing trades are shown by the two red lines on the chart. Total time in the trade was only 6 minutes, but it did take me about 20 minutes of research and analysis work before placing my first trade. Still not bad, especially when you consider that the trade generated about $144 in profits!
If you would like to learn more about doing these types of "scalp" trades, please drop me a line by clicking on the comments tab, or send me an email to: [email protected] and tell me more about what you would like to learn through our website at: InvestorsHelp.net.
Good Luck, Trader_Joe
1. Do a scan to find a low price stock that has a "gap-up" in the premarket, Look for a stock priced between $1 to $10,
2. Look at the news for the symbols you find that are of interest to you,
3. Review the premarket price pattern as it forms on the 1 minute chart,
4. Watch for an ideal time to buy the stock within a short time after the market opens based on a price action that you like,
5. Buy the stock, usually a quantity of several hundred shares, and closely watch the price action on your 1 minute chart, and
6. Quickly sell all of your shares when the price of the stock shoots up like a rocket!
That's exactly what I did this morning as shown in the above price chart of Lightbridge Corp. [LTBR].
After doing my premarket scan on my Think Or Swim [TOS] platform, I identified LTBR as a possible scalp trade. I began watching this stock in the premarket on my 1 minute chart. At the open, price tried to move up, but I waited for the first pullback and then bought on the pop up as shown above on the green line.
After watching the price action for a few minutes, I prepared three exit orders as shown in the "Trades Box" shown above. I wanted to take profits on 300 shares quickly, then try to grab some additional profits on the remaining 200 shares. These closing trades are shown by the two red lines on the chart. Total time in the trade was only 6 minutes, but it did take me about 20 minutes of research and analysis work before placing my first trade. Still not bad, especially when you consider that the trade generated about $144 in profits!
If you would like to learn more about doing these types of "scalp" trades, please drop me a line by clicking on the comments tab, or send me an email to: [email protected] and tell me more about what you would like to learn through our website at: InvestorsHelp.net.
Good Luck, Trader_Joe
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