Sunday, July 15, 2012

Watchlist for next week Part 2

As promised, here is the second part of the watchlist.

Here is the link to the first part of the watchlist.

Take care and good luck!

Watchlist for next week Part 1

Going through my weekend scans, I find that a lot of stocks are setting up nicely after the gap up on Friday. Here are a few of them. The important levels are marked on the charts itself. Be sure to check when a stock is reporting before taking any position in it.

I will post a second part of the watchlist later in a little while. Meanwhile, here are a couple of sectors that are looking good heading into the next week.

Take care and good luck!

Sectors to watch out for

While going through the weekend ritual of making a watchlist for next week, I couldn't help but notice that the REITs were setting up nicely. Well, looking at the REIT ETF below, it is no surprise at all that many of them are setting up nicely here.

Also, the utility sector is looking promising for next week.

I will be back with the watchlist in a little while.

Take care and good luck!

Monday, July 9, 2012

Chart of the Day

Today's Chart of the Day is BMRN. Broke out of a beautiful, low volume bull flag today. On a 52 week high, so clear road ahead.

Take care and good luck!

Wednesday, July 4, 2012

Are the markets overbought?

With the markets being on a tear during the past three trading sessions, its time to have a look at our trusty old McClellan Oscillator to see if the markets are overbought here. Below are the charts of NASDAQ and NYSE McClellan Oscillators with the overbought levels marked on them.

As can be seen from the above charts, the markets are well into overbought territory. The NYSE McClellan Oscillator is in fact, at its highest level in the last two years. While the momentum clearly lies with the bulls, the odds now favor a pullback, or at least a period of consolidation.

Here's how to play these markets.

Do remember that an overbought market can very easily become "more overbought" just as an oversold market can very well become "more oversold". Then how does one play overbought markets? Well, here are a few tips on playing overbought markets.

(1) Don't go chasing momentum stocks now. Chances are you will be left holding the bag.
(2) Take partial profits from longs and let the rest run. 
(3) Don't wait to sell at the top. Calling the top is a fool's game.
(4) If you want to go short, start with a small position. This way you can give it room to run instead of being forced to call the exact top. If the market indeed reverses, you will get plenty of chances to add to your positions later.
(5) Most importantly, keep your stops on all short positions no matter how confident you are of a pullback here. Remember, the markets can stay irrational a lot longer than you can stay solvent. 
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Take care and good luck!