Friday’s session left no doubt about that this market wants to go in the short and intermediate term. Stocks rallied with gusto on Friday with volume coming in higher on both major exchanges according to my data providers. The DJT led the session higher followed by the RUT which is exactly what I wanted to see following the start of the pullback a few sessions ago. What makes this rally even better is that we blasted out to new high across the board in the major market averages while all four momentum oscillators that I track on an intermediate term basis continue to work off overbought conditions. This is a very bullish technical condition historically.
This has been a very impressive move following the Brexit volatility. With the major averages all continuing with their uptrends, and their trailing 50 and 200 day moving averages also in uptrends, one would have to come to the conclusion that baring any major distribution pullbacks are to be accumulated and not sold. This appears to be a market where overbought is going to remain overbought for some time. If that is the case, then we are definitely in the sweet spot and should be looking to capitalize on our EOD trend following positions over longer periods of time.
Before this uptrend really got underway taking profits once a stock was up 20%-25% made sense on all trades. However, with the market now making new highs on strong volume and leading stocks setting up and breaking out left and right I am going to look to hold for much larger returns in the new long positions. I will still look to take profits on 1/4 to 1/2 of my positions in any speculative trades, swing trades, and daytrades if they are up 20%-25%. But with the higher quality merchandise, I am going to try to let them run. If any serious distribution hits the market then I will obviously reanalyze the situation but for now I want to try to attain more EBIO 200%-type of returns in a short period of time.
This weekend I have two very high quality long positions. One is a CANSLIM and pre-Perfect Speculator scan quality stock that is producing a pocket pivot point signal that was also confirmed in my Price/Volume/BOP scan. It is a tad extended from its 50 day moving average and the current base is not very long but the potential reward to the current risk is well in my favor in this strong uptrending market. The other stock is a CANSLIM quality stock that was also a member of my pre-Perfect Speculator scan at one point. It is retaking its 50 day moving average and looks like it wants to challenge its old 2016 highs. The current reward to risk ratio is too favorable to pass on in this strong tape. This stock was not confirmed in any other of my scans.
I am very open minded to how the market will possibly trade during the upcoming week. I would think based on Friday that it is going to be a good week but with the overbought conditions still in effect I am going to make sure to hold on to some of my small FAZ and UVXY positions and all of my small DRV position. Despite those hedges, all of our operational models are under BUY signals and I am well over 95% long. With my portfolios already fully long heading into Friday’s breakout and it maintaining that position heading into the new week we are setup to really see some major outperformance relative to the overall market if we do indeed continue to move higher.
If the market reverses, I have my stops in place exactly where I want them on every current position. Always know where your breaking point is and in this market feel free to let your new long positions have some wiggle room at first. But don’t let any current winner turn into a loser in this tape. Unless it is earnings related. I got caught in TDOC on Thursday turning a 10% gain into a 20% loss. If I would have just ignored my stops and just held the stock would now be back in the black–useless hindsight bias. As it is, I obeyed my stops and took my loss. You just can’t risk it not working out. In most cases your stock is going to act like ECPG and QVCA did on Friday following earnings. Better to keep losses tiny and move the capital into a new leading name. There are plenty of them right now.
Have a great rest of your weekend and I wish you all the best in your personal trading during the upcoming trading week. Trade well my friends. If you want to learn to ride the wave of profits that our current top holdings (below) have produced during this most recent uptrend, click here. Aloha!
TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – SIGNAL DATE
EBIO long – +200% – 5/26/16
CLR long – +138% – 2/11/16
GRAM long – +98% – 4/1/16
HBP long – +57% – 3/28/16
SIMO long – +56% – 3/11/16
ALRM long – +42% – 3/1/16
GENC long – +42% – 2/26/16
EBIX long – +37% – 3/17/16
GGB long – +32% – 7/12/16
FCPT long – +30% – 2/29/16
APLP long – +30% – 3/31/16
ABMD long – +29% – 3/29/16
OLLI long – +29% – 2/24/16
HNNA long – +29% – 4/14/16
PTX long – +29% – 7/21/16
