Professor’s Comments

Posted by OMS  at April 22nd, 2014

The Dow rose 41 points, closing at 16,449.  Volume was extremely light on the rise, coming in at only 78 percent of its 10 day average.  There were103 new highs and 13 new lows.

The rise on light volume was hard to interpret.  On Friday, there was a small change in the A-D oscillator.  I was hoping that it would produce a decline of about 100 points or so to complete the current consolidation pattern.  It didn’t happen.  On the other hand, yesterday’s 41 point rise was not a Big Move to the upside either.  If that had occurred, it would have likely turned most of my indicators and Lists positive, starting a major rally toward 17,000.

The strange thing that did happen yesterday was that DXD, the inverse tracking ETF for the Dow (DIA), reappeared on the Dean’s List.  So right now, the Dean is telling us to keep our power dry as far as the purchase of new stocks is concerned.

Same for The Professor.  Last night he only had 18 longs to go with the 7 shorts he highlighted.  He’s sleeping.

One thing that is not sleeping is energy.  Yesterday, Halliburton (HAL) hit a new high of 63.88 before closing at 62.92. Several of our other energy stocks, like Schlumberger also made new highs.  But now is not the time to get complacent with energy.  Remember what I always say: “No stock, no matter how good, goes to heaven.”  Stocks go to targets.  And my target for HAL, based on its Hockey Stick Pattern is the 65 level.  So yesterday, HAL was only 1.22 points from its target. 

This does not mean that HAL and other energy stocks can’t go on to exceed their targets.  They can.  But the odds say they won’t.  So If you’re holding energy stocks now, it’s probably time to start thinking about doing some money management. 

If you bought HAL back in early February at the 51 level, the Professor’s money management rules called for taking a few bucks off the table at the 58 level and letting the rest ride.  So now with HAL trading near 63, it’s time to start moving up the original stops to protect the remaining shares.  If you bought HAL near the 55 level, when it pulled back to form its small Hockey Stick, and you haven’t pulled anything off the table yet, it might be time to protect some of that profit.  Remember, protecting profits by selling a few shares, placing stops, and letting the rest ride is a Big part of The Professor’s Methodology.  This is especially important when the overall market is NOT giving us clear signals….like now.

For the very short term, I’m still expecting some type of pullback.  However, because several of my indicators are starting to strengthen, the pullback might not get down to the 15,850 level I mentioned previously.  Now something like 16,250-16,300 is starting to look more likely.  If this happens in the next 2-3 days, I will consider it to be a major buying opportunity.

Right now, most of the sectors that I monitor are still negative.  But they are improving fast!  The sector with the biggest delta trend score is Big Pharma-Biotech.  This sector includes most of the big name pharmaceutical stocks, like ABT, AGN, BMY, LLY, MRK, MYL and PFE.  A composite chart of the sector shows that a really nice Hockey Stick Pattern has formed during the recent market pullback, which leads me to believe that stocks in the sector will be among the leaders in the next rally.  I don’t have time to post a chart of this sector today, but I will when I have more time. 

Anyhow because of yesterday’s low volume, all I’m doing today is watching.

I’m also scalping RGLD to the short side.  Royal scalps have been very good to me lately and yesterday was the first day where 2 of the 3 PT indicators on the Daily charts have turned Red.  So I’m still not holding my scalp shorts overnight.  But more and more, it’s starting to appear that if the markets do start to rally, gold shares will not participate.

That’s why during the next month or so. I will start looking to be long the market with stocks from strong sectors and short gold.

That’s what I’m doing,

h  

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.