Professor’s Comments April 24, 2015
Posted by OMS at April 24th, 2015
The Dow rose 21 points, closing at 18,059. Volume was moderate on the rally, coming in at 109 percent of its 10-day average. There were 128 new highs and only 13 new lows.
Not much changed with yesterday’s trading. It still appears that the Dow is nearing completion of wave 2 up of 3 down. Yesterday’s early decline followed by a late rally was certainly not impulsive. And from the looks of things, it appears that another day or two of rally should complete the pattern. After that, stocks should start to fall hard IF I’m correct about the current move being a wave 2 of 3.
If not, then the Dow will likely exceed the 1 March high of 18,289 and finish wave ‘c’ up slightly above 18,300.
With the Dow trading in a very narrow range, where it seems to go up one day and down the next, all I’m doing now is scalping.
Yesterday was another good example, and this time I used the home builders.
Like I said in yesterday’s early supplemental posting, I noted that several home building stocks have been appearing on the Honor Roll as shorts. And whenever this happens, it is usually a sign that the sector is in trouble. So for the past few days I have been taking trial short positions in stocks like PHM and RYL.
Then yesterday, the bottom fell out of PHM and RYL as they dropped 1.72 and 2.52 points respectively.
Again, all I have been doing is watching the Honor Roll and then trading the stocks on the shorter term bars.
In the case of RYL, I was using the 30s. The PT indicators had turned negative the previous day, so I established a ‘trial’ position after noting that just about every homebuilder was going negative. So when I established my ‘trial’ short position early Wednesday afternoon, I just held it. Then when the market opened down on Thursday, I added to the position just after the open and rode the red bars into the close.
This is all I’m doing now as I wait for the overall market to complete its topping pattern.
BTW, I felt very comfortable taking these short positions because the Summation Index, one of the key breadth indicators that make up The Tide, was negative. However the Summation Index and The Tide turned positive after yesterday’s small rally, so I will NOT be doing any shorting now until these indicators turns negative again.
I have to tell you that scalp trading like this is NOT what I like to do. But when the overall market has been stuck in a trading range for weeks, scalp trading is something I have to do to get paid. My choices are either to take early positions in inverse index ETFs like the DXDs and see them get whip sawed every day by the multiple waves within corrective wave 2, scalp trade, or stay out of the market. I choose to scalp trade.
I even scalped a few shares of gold (RGLD) yesterday, exiting the trade at the close. One of the reasons I did not hold my shares overnight was because I noticed that a wedge pattern could be forming in GLD, and if this is the case, then gold will likely need one more leg lower below 114 to complete the pattern.
Yesterday I talked about establishing a longer term position in GLD. So IF GLD trades below 114 during the next 1-2 days, that’s where I will be establishing my longer term position. I will be doing this within our IRA accounts.
Meanwhile, with lots of gold related stocks and ETFs on the Member’s Watch List, I’ll continue to look for scalp trades in gold, using RGLD as my trading vehicle. All I’m doing is watching the shorter term bars (5s), entering the trade when the indicators turn Green and then monitoring the trade.
Like I said, it’s not something I like to do, but you have to take what the market gives you when it’s in a non-trending pattern.
That’s what I’m doing,
h
Market Signals for 04-24-2015 |
|
---|---|
DMI (DIA) | NEG |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
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Category: Professor's Comments