Weekend Strategy Review October 19, 2013

Posted by OMS  at October 19th, 2013

The Dow rose 28 points on Friday, closing the week at 15,398.  It was up 160 points for the week.  The NASDAQ was up 51 points on Friday, closing the week at 3914.  It was up 122 points on the week.  It was a great week to be owning all those four letter symbol NASDAQ stocks.

If you recall, several weeks ago, the Dean was telling us that the NASDAQ was a LOT stronger than the Dow.  He had QQQ and QLD near the top of his List, when the DIA and DDM were nowhere to be seen.  Because of this, I made several comments about how NASDAQ stocks were likely to outperform the more traditional Dow stocks and lead the market higher once the next rally wave started.  And this is exactly what happened.  Several students were able to ride stocks like Sandisk, SNDK, from the mid 50s to over 69, and BIDU from 135 to 169 as they rose in response to their Hockey Stick Patterns. 

All this excitement was going on while stogy Dow stocks like IBM were getting hammered.  There was a Big difference between these stocks.  A difference that if you have some time this weekend, you might want to take note of.  All of the fun NASDAQ stocks that we have been talking about and trading the past two months were in well defined Up trends.  They were all on the Member’s Watch List. 

All you had to do was use the SIGN.  Pick a stock from the List,  look for a pattern and climb aboard when the indicators turned Green.  It was pretty easy.

But did you ever see IBM on the List?  The stock was totally absent.  No!  It was in a downtrend and remained in a downtrend.  The stock made a small pop in mid September, but the weight of those moving averages was like a piano on its back.  It just couldn’t play with the other kids on the street when the fun began.   That’s the difference between being in stocks that are in well-defined Uptrends vs. those with 50s below their 200.

Anyhow, it was a good week.  I received all sorts of emails from students who were having fun trading stocks like SNDK, SLB, HAL, BIDU, GILD and many others that I have been talking about the past few months.   I even received a few from students who were trading Apple, AAPL.

One email in particular from Dave M. made me feel really good.  He told me how he started to purchase AAPL after he saw the TLB pattern and rope jump.  Then watched as it started to appear on the MWL and bought a few shares in the mid-480s when the indicators turned positive.  He wrote to tell me how he was taking a $5,000 profit on Friday, as the stock approached the 509 level.  For me, this was a dream email.  Here was a guy with discipline.  He saw the small Hockey Stick Pattern on Apple develop.  Then he measured the Stick to get his target near 530, and then once the stock reached the half-way point, took 5 grand off the table. He also told me that he didn’t sell all of his shares, just in case AAPL continues to move higher. Perfect! :>)

I was doing the same thing on Friday.  I said good-by to a lot of my SLB, near 94.  Remember I bought most of it near 80, off the beautiful HS Pattern that had developed in August.  The stick of that pattern projected a target in the mid 90s, so when the stock hit 94, that was close enough for me to start lightening up.

Here’s the deal, and it’s the only thing I want you to think about for the BIG PICTURE STRATEGY this weekend.  No stock goes straight up!  As I have said many times, stocks go up in waves.  And this weekend, when I look at the chart I posted (at the request of Gene S.) I see an Ending Diagonal Pattern on the broader S&P.  I see the price at the upper trend line.  I also see that on Friday, the A-D oscillator came I with its second EXTREME overbought reading of 193.19 .  After 2-3 of readings like this, the market usually has some type of pullback.

So as I always say, trading is an odds game.  And with prices approaching the upper trend line on the SPX, a lot of my stocks approaching their targets, and an EXTREMELY overbought A-D oscillator, I don’t like the odds anymore.  I’m not saying that the market can’t push higher from here.  It can.  And that’s why I’m still holding a few shares.  All I’m saying is that the odds are no longer what they were a few weeks ago.

What I’m doing now is starting to look at a few other things that I have reserved places for in my garden out back.  You know, the things I’ve been watching as potential seedlings.  Things like the metals and the aggs.   It’s not planting time yet for CORN, but the ETF has a well developed TLB pattern and is showing some really nice positive divergence on its P-volume.  The almanac is telling me that it could be a good time to plant some CORN IF the PT indicators start to turn positive. I also see that other commodity ETFs, like DBA and DBC are starting to appear near the bottom of the Dean’s List.  I would LOVE to see CORN make an appearance.

Same for the metals.  Right now there are a lot of gold and silver stocks and ETFs that are hitting the Lists.  Anglogold, AU, is actually leading the Dean’s List.  But right now, with gold (the metal) still looking that it wants to make another leg lower, I’m really not all that interested in paying up for a mining company.  I’d much rather be trading a company like Royal Gold, RGLD.   Royal owns royalty interests on 36 producing properties, 21 development stage properties, and 147 exploration stage properties.  Its principal producing royalty interests on properties are located in the United States, Canada, Chile, Mexico, and Spain.  In other words, it does business in countries that are friendly to the U.S.  By owning the interests in many gold companies, it reduces the risk of owning an individual miner. 

Anyhow, I have a space reserved in my garden for RGLD.  I’m just waiting for it to appear on one of the Lists.

Royal has a much better pattern that most of the miners.  After it formed a TLB pattern in late June, it started to move up and ‘Jumped the Ropes’ in late August.  Since then, the stock has been pulling back in what appears to be a wave 2.  But there is a bit of a problem with the stock, in that during it’s apparent wave 2 pullback, it did not continue to trade above the ‘Rope’” so the 50 is still well below the 200.  In other words, the stock is still in a downtrend.  Note that with most turn around stocks, like AAPL. the wave 2 pullback serves to pull the 50 above the 200, enabling the stock to move into an Uptrend.  But with Royal, the stock is still not even close to entering an Uptrend, so we need to be especially careful.  Because of this, IF the PT indicators do turn positive in the days ahead, I’m only going to plant a few seedlings.  And I’m going to watch them very closely.   The increasing P-volume tells me that something could be going on with Royal. But for now, it’s still not time to fall in love.

I’m seeing the same type of trading action on silver stocks and ETFs like PAAS and SLV.  But I need to see more from them (like SLV appearing on the Dean’s List) before I put them in to my garden. 

Here’s the thing:  With the Fed printing money like it’s going out of style, money should continue to pour into the markets in the months ahead.  And with interest rates being so low, that money is not likely to leave anytime soon. It has nowhere else to go.  But odds are that a lot of that new money will not likely go into the stocks that have already made their run.  I believe that money managers will start looking for places to put that money to work in the undervalued sectors.  Sectors that have not participated in the current rally. And as the money moves fro one sector to another, it will likely cause several pullbacks as the overall market continues to chop higher.  That’s why I’m starting to look for new ‘seedlings’ now.  Like most money managers, I will be looking for places to put my profits from SLB to work somewhere else.  The question is where?   Hmmm?

So that’s what I’ll be doing in the days ahead.  Looking for seedlings.

Have a great weekend,

That’s what I’m doing,

h

BTW on Monday morning, my UNF students will be receiving a special email from Valerie announcing a Special Update Class on next Thursday.  If you have the time, I strongly recommend that you attend this class.  Seats will be limited because of Classroom availability, and I will only be doing this Class one time.  So IF you’re interested, please call Valerie at 620-4255 or one of her Support Team Members at 620-4200 the first thing Monday morning.

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