Caution: Pullback Ahead

Traders should be on alert for a change in the short-term trend

   

Caution: Pullback Ahead

Current Long Positions (stop losses in parentheses): VMW ($83.70), APOG ($11.56), BIDU ($105.80), ESV ($48.75)

Current Short Positions (stop losses in parentheses): DTV (40.50)

Bias: 22% Long

Economic Reports Due Out (times are EST): MBA Purchase Applications (7 a.m.), Quarterly Services Survey (10 a.m.), EIA Petroleum Status Report (10:30 a.m.)

My Observations and What to Expect

* Futures are mixed heading into the open.

* European and Asian markets are mixed as well.

* Yesterday’s trading action was extremely disappointing for the bulls. After gapping above the 1,227 level, the S&P 500 sold off in late afternoon trading, failing to hold the important price support level.

* If you look at the weekly chart, we are essentially stuck in a sideways market pattern between 1,186 and 1,227 — a 41-point price range.

* Volume was extremely high yesterday, despite finishing flat.

* As a result of the action seen yesterday, we are now looking at a shooting star pattern, which can be a trend-killer. The last couple of times we have had one on the S&P, we’ve seen consolidation follow, which would seems like a high possibility at this point.

* I am on high alert for a possible change in the short-term trend in this market. I recommend traders to the long side show a lot of caution as well. While I am not yet willing to close out my long positions, I will not hesitate to do so if we see further selling today.

* The current rally on the daily charts still has the makings of what we saw on Sept. 1, after which the market rallied for over two months.

* Dip buying will continue to be the name of the game for traders.

* The U.S. dollar and gold seem to once again be trading inversely to each other. The dollar rebounded yesterday, but still did not manage to improve itself from a technical standpoint.

* For the bears: Hold on to the late day sell-off and push the markets lower today. Doing so will cause the bulls to reconsider the legitimacy of this rally.

* For the bulls: Reclaim the 1,227 level on the S&P and be sure to close above it.

Actions I Will Be Taking

* Will look to add some morning breakout plays to the portfolio today.

* DIRECTV (NASDAQ: DTV) is my lone short position, but I may add more should the market continue to show weakness.

* Tightened the stop-losses in DTV.

* Stopped out of Google Inc. (NASDAQ: GOOG) and Activision Blizzard, Inc. (NASDAQ: ATVI) for a loss. Closed out the remaining position in Range Resources Corp. (NYSE: RRC) for some descent gains.

* Added Ensco plc (NYSE: ESV) to the portfolio.

* Follow me in the SharePlanner Chat-Room today for all my live trades, including my day trades.

The SharePlanner Swing-Trading System is a proven trading strategy that has outpaced all the major indices with an 8-year return of over 1,010%. This year alone it is up 29%, with 64% of the stock picks being winners. It’s an easy trading system that requires very little effort after you buy the stock and great for those who can’t watch the market all the time! Find out more by visiting SharePlanner.com.


Article printed from InvestorPlace Media, http://investorplace.com/2010/12/caution-pullback-ahead/.

©2014 InvestorPlace Media, LLC

Comments are currently unavailable. Please check back soon.