Professor’s Comments April 29, 2014
Posted by OMS at April 29th, 2014
The Dow had an interesting day yesterday. It rallied over 100 points early, then gave back all of those points only to finish up 87 points, closing at 16,449. Volume was on the high side, coming in at 125 percent of its 10 day average. There were 99 new highs and 53 new lows.
In yesterday’s 1.30 Update, I talked about what appeared to be the ‘b’ wave in an a-b-c sequence for wave 2. I mentioned that IF the move was wave ‘b’, then wave ‘c’ of the sequence should follow providing us with a nice buying opportunity before the impulse wave or wave 3 up begins.
So when the Dow was giving backall of its early morning gains, I was starting to buy stocks. I bought back most of the Halliburton (HAL) I had sold several days earlier. I even picked up a few more DDMs. So now I’m about 80 percent invested.
At this point, I’m not sure if yesterday afternoon’s decline was the end of wave 2 down and the late rally was the start of wave 3 up. The only way I’ll know for sure is if the market starts to rally hard from current levels. If the Dow starts to beak above 16,600 now, it’s highly likely that wave 3 up has begun. This wave should take the Dow to new highs above 17,000, possibly to the 17,300 level. If the Dow doesn’t rally hard, then there is an outside chance that the wedge pattern that we have been watching for the past few weeks has still not completed, meaning that a drop back to 16,000 is still possible. This is why I’m still not 100 percent invested.
Another reason for my caution is that there was a small change in the A-D oscillator last night. The small change was less than 5 points, so the possibility of a Big Move within the next 1-2 days is high. If this ‘Big Move’ starts to take the Dow above 16,600, enjoy the ride. Impulse waves will make you smile.
On the other hand, IF the Big Move is to the downside, watch the 16,300 level. If this level is broken, the next stop would be near 16,000. And even though I believe this is a low probability scenario, I mention it because I believe it would be a ‘ring the bell’ buying opportunity.
Just after my 1.30 Update, I received several emails from students telling me how much fun they have been having trading the markets the past few weeks. Daryle, one of my new students, wrote to tell me about his experience trading Halliburton. Apparently he had sold some of his position at 65 and was looking to buy back those shares when it was near 62. Daryl was looking at the Daily charts and wrote to tell me about the following condition:
1) The 50>200
2) DMI is positive
3) Looking at the 2 period RSI Wilder it’s below 30 (28.21) indicating it is oversold. It’s barely below 30 and, ideally, you want it to be under 20 so it’s not SUPER oversold but it is still oversold.
It looks like it could be forming a new blade and if so could be good for a 7 point rise taking it to almost 70.
In other words, Daryle had spotted the conditions for a classic Rifle Trade.
I love it when I get feedback like this! It puts a smile on my face.
When the market was down yesterday afternoon, a lot of stocks were candidates for Rifle Trades. If the market does not break 16,600 during the next day or so, the odds are high that these RT conditions will present themselves again.
So all I’m doing today is watching two numbers: 16,600 on the upside and 16,300 on the down. I have my ticket to ride. Now all I’m doing is waiting for the train to come into the station.
That’s what I’m doing,
h
Market Signals for 04-29-2014 |
|
---|---|
DMI (DIA) | POS |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | SM CHG |
DEANs LIST | 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