Professors Comments July 19, 2013

Posted by professor  at July 19th, 2013

After 4 days of sideways trading that appeared to be a small corrective wave 4, the Dow rallied for 78 points,  closing at 15,548.  And even though the rally was one day late, it was likely the Big Move suggested by Monday’s small change in the A-D oscillator.  Intraday the Dow was actually up over 119 points to a new high of 15,589.

Volume increased on the breakout to 115 percent of its 10 day average.  Increasing volume is exactly what you want to see on a healthy breakout within a wave 1 up.  There were 333 new highs and only 14 new lows

The rally caused the P-volume on the DIA to finally turn positive.  If you recall, I have been saying that I cannot imagine how a rally to 16,800 can start without a positive P-volume.  So now this has happened, and all of the PT indicators are currently positive on the Dow, SPY, and QQQ.   Just remember that even though yesterday’s rally was strong, it came after a small wave 4.  So it was likely wave 5 up of wave 1.  So after a 100 point rally, we need to be mindful that wave 1 could be nearing completion.  Wave 2 down could be right around the corner.  It could start today.

This is one of the reasons that I have not been chasing the rally in the indexes.  I’m waiting for the wave 2 pullback.  Given that all of the major indexes remain in Uptrends, and the Dean’s List is positive, I’m just waiting for a time where the 2-period RSI Wilder on the Daily Chart will become oversold.  That’s where I will be doing most of my Buying.

IF the final ‘c’ wave rally of Major Wave E up is going higher, it will likely do so in 5 waves.  And right now, we only appear to be working on wave 1.  We still have to form a wave 2 Hockey Stick Pattern so that the wave 3 impulse wave will have something to spring from.  That’s why I have not been in any hurry to trade wave 1. 

The Rifle Trade set-up I talked about yesterday with TBT, the inverse 20+year Treasury ETF, was triggered just after noon yesterday at 74.85.  TBT finished the day at 75.54, up 1.70.   So now, I will manage this position on the 60s. 

BTW, I have a few subscribers who keep asking me to teach a course in trading options.  While I don’t plan to do this anytime soon, I should point out that my Rifle Trades also have possibilities for option traders.  For example, with only two day to go until expiration, the current month July Call could have been purchased just after yesterday’s open for less than 20 cents.  That same Call finished the day at .79 cents for a whopping one day profit of 300 percent!  Like I said, I don’t teach option trades, mostly because I’m still trying to get most of my students to follow the DMI and learn to do basic Rifle Trades.  But you should know that some of the techniques discuss in these Comments also have application to other forms of trading.  But the nice thing is that you get this information for very little money compared to the thousands of dollars that you would have to pay for a good options trading service.

I continue to hold my Basic Position in FXP as the ETF continues to be supported by the 200.  Most Asian markets traded lower overnight with Japan and Shanghi down about 1.5 percent.  With FXP in a newly developed uptrend, and a pattern that looks like a wave 2 pullback, I’m willing to give this ETF an honest chance.  Besides, the MACD on FXI is still Red.

I also bought a few shares on VRTX yesterday, mostly because PBE, the Biotech ETF  is #2 on the Dean’s List with a RS rating of 4.  VRTX which supports a RS rating of 3, is a very volatile stock that trades with a big spread between the bid and asking price.  However, I have found that if I place a limit order about half way between the spread, or even a few cents above the bid, it almost always gets filled.  Yesterday I used a pullback on the 5s just after the open to buy a few shares, very similar to what I do when I scalp trade.  And as you know, scalp trading is NOT and exact science.  Right after the open, the 2-period RSI Wilder on the Daily’s dipped below 40 which is not exactly oversold.  But with Positive indicators AND narrow Bands on both the Daily Charts and the 60s, I thought I would take a chance.  As long as PBE stays on the Dean’s List, I’ll look to add a few more shared on pullbacks, but this time only as strict Rifle Trades.  Meanwhile I will continue to manage the shares I bought yesterday on the Daily’s.

Looking for the a pullback to establish a few more Rifle Trades.

That’s what I’m doing,

h

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.