The Big Wave Trading models are under an operational BUY signal across the board following Thursday’s session where the major market indexes convincingly retook their 50 day moving averages on well above average volume. The switch on Thursday was a rare one where our models switched straight from an operational SELL signal to an operational BUY signal.
Lately there has been a pattern of the market bottoming shortly after we switch our models to operational SELL signals and that so far is once again true. That might change, obviously, if we fail this rally attempt. However, the pattern lately has been a SELL signal to signal a near bottom. Obviously, one day we will switch to a SELL signal and the market will fall off the cliff. For now, it remains a contrarian signal.
Our personal biggest tell that the SELL signal might be another false signal is the fact that most of our working long positions never hit their stops despite the market pulling back. At the deepest point of the pullback this month, we were still 60% long and only Put on 5% of our account capital in our accounts. Those hedges have obviously come off and after a flurry of long signals this week we are back to being near fully invested.
We are going to continue to keep very tight Sell Stops on our positions until this market can break free to new highs and give us a convincing signal that it is safe to widen our trailing stops. These tight stops is causing some damage in taking us out of positions that hit our Sell Stops and then immediately reverse higher. Some of these stocks have rocketed higher.
This is why it is important to place Buy Stops on positions that get taken out that then start to show signs of reversing. By employing this methodology we have been able to get back in to some stocks that have hit our stops and then rocketed higher. That being said, we have also been taken out of a few positions that are now much higher. It is going to happen in this very volatile tape.
We continue to hold more positions than we would like to be holding but with the market as volatile as it is. In a more calm market we would not nearly have as many positions. However, with this being one of the most volatile tapes in the short-term that we have seen the past 20 years, yet being just a few percentage points away from an all-time high, this safe trading is going to continue on our end.
If you are smart enough to be able to focus 20% of your account capital in only 5 stocks and get away with it, more power to you. I wish our EOD patterns were strong enough to operate like this. Right now, they are not. Maybe we will get our 2003 patterns following the next real market correction.
Have a great rest of your weekend. Thank you. Aloha from a very wet west side of Maui.
TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – DATE OF SIGNAL
VIPS long – +539% – 7/17/13
OVAS long – +379% – 8/8/14
AGIO long – +146% – 9/24/14
VDSI long – +61% – 8/4/14
PAYC long – +52% – 10/30/14
TASR long – +45% – 11/10/14
SWKS long – +44% – 10/28/14
TMF long – +40% – 11/24/14
RUBI long – +38% – 10/29/14
CVTI long – +34% – 11/3/14
RENT long – +32% – 9/24/14
AVGO long – +27% – 10/28/14
KITE long – +25% – 12/17/14
