From the Trading Desk

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio remains under BUY signals across the board. There is nothing still to do or think too much about as the trend higher is smooth and has come under very little pressure minus two minor distribution days in the Nasdaq Composite.

Overall, many traders believe that it is time for us to take a rest or pullback. However, traders have been thinking this for a while and until it actually happens trading on that notion is not wise.

On the sentiment front, it is getting very bullish out there for sure. However, nobody said it can’t get more bullish. Who is to say that bulls can not hit 90% on the Investors Intelligence survey? Who is to say it can not hit 90% on the AAII survey? Who is to say that the VIX can’t trade below 5 or hell even below 1? I know that is quite irrational but nothing about what has happened since 2008 has been rational. There is no need to believe it is time to start now.

We would love to see a pullback here as it would most likely lead to a very nice consolidation period in many leading stocks that would make their upcoming next round of breakouts that much more powerful. Our biggest concern with a non-stop uptrend is the possibility of a hard reversal that might lead to a sustained downturn instead of a buying opportunity. However, that being said, it is all talking points at this juncture.

All that matters is price, and sometimes volume (though it hasn’t mattered since 2009), and that is what we will continue to focus on. Set buy stops on your favorite stocks nearing breakouts to make sure you get long at the exact pivot points and you will do fine. If you wait till the EOD to buy breakouts in this market environment, you greatly increase your chances of getting caught in a normal shakeout/pullback in the stock.

Great luck next week everyone. I wish you all a very prosperous week. Aloha.

Top Current Holdings – Percent Return – Date of Signal

CSU long – 71% – 9/4/12
HEES long – 64% – 9/4/12
CAMP long – 48% – 4/26/12
VRNM short – 48% – 4/10/12
FLT long – 35% – 9/6/12
ASTM short – 35% – 7/17/12
GNMK long – 30% – 11/16/12
POWR long – 29% – 12/11/12
EAC long – 27% – 12/17/12
HIMX long – 26% – 12/19/12

Comments

  1. You mentioned ” If you wait till the EOD to buy breakouts in this market environment, you greatly increase your chances of getting caught in a normal shakeout/pullback in the stock.”.
    ..
    Apologize for my lack of understanding, but did you really mean,
    ” UNLESS you wait till the EOD to buy breakouts in this market environment, you greatly increase your chances of getting caught in a normal shakeout/pullback in the stock”. ??.

    Thank you for clarifying.

    • Hi Dan,

      It is OK. I did intend to mean what I did say in that sentence. This market is moving too fast when a stock breaks out nowadays and by the EOD the price is usually past 3-4% of the pivot point area in the base. I used to not mind chasing a breakout (back in the good old days) up as much as 10%! Since then it has been less than 5% as even buying a breakout up 5% on the day leaves you at extremely high odds in this new HFT/algo market of getting whipped out. It is higher odds now that this will not happen, as we are in a strong uptrend. However, I still hate chasing breakouts past 4% in this tape. If you have a stock on watch like KORS recently or AMZN or DDD or SSYS, you can see that buying breakouts on an EOD basis throughout the past year in these leaders has been an extremely low odds play if you cut your losses like the greatest of all time recommend.

      If you instead know that you love a stock like let’s say AMWD or YNDX or HDB or WFM or PRAA you can set a hard buy stop just slightly above the pivot point of the base. When the stock crosses it intraday your order will turn into a market order and execute you as close ot the pivot point as possible. By the end of the day, in this tape, you are more than likely going to be profitable. When you are not, you cut your loss.

      I hope this clarifies the sentence a little bit more than it was originally broadcasted. Have a great upcoming week! TNGO might be one also to set buy stops on. Also, if PCLN can base out here for at least 5 days this would be another one to set a buy stop on. EXPE is a perfect example of a stock moving too far past a pivot point in one day on Friday.

      Aloha Dan.

  2. Thanks for taking the time to explain. Much appreciated and wishing all of us great profits ahead!!!.

    • You are extremely welcome. My pleasure. I think it is time for a pullback, following today’s intraday action in the market, DDD, SSYS, and a few other leading stocks.

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