Professor’s Comments August 15, 2013

Posted by professor  at August 15th, 2013

The Dow fell 113 points yesterday, closing at 15,337.  It got as low as 15,316 which so far is the low for this wave 2 down.  I’m still looking for the Dow to move a bit closer to the 15,000 level.

After noting several days of A-D oscillator readings that were very close to a normal ‘small change’ reading of 10 or less, the large decline was not entirely unexpected.  Volume was on the light side, coming in at 94 percent of its 10 day average.  There were 102 new highs and 253 new lows.

I spent most of the day watching two stocks, SLB and GILD.  Schlumberger, SLB, held up nicely during the decline, as it moved sideways and continued to form its Blade.  It was up a few cents most of the day, but closed down 0.06 cents at 82.16.

On the other hand, Gilead Sciences, GILD, a stock recently highlighted by Emeritus, declined steadily after a small opening pop.  Recall that yesterday I mentioned I would be watching GILD as a potential Rifle Trade.  And while I said I would be watching, I also said that an overall decline in the market would likely put pressure on the stock.  And this is exactly what happened.  GILD finished the day down 0.76 cents at 58.17. 

Sometimes, knowing when to stay out of a stock is the most important decision you can make.  And this is exactly what happened with GILD yesterday.  The PT indicators on the 60s never turned positive..

Just after the open, 2 of the 3 PT indicators turned positive, and I had my finger on the trigger.  I had GILD lined up in my sights.  With the P-volume and MACD already positive, my eyes were focused on the DMI.  I watched and waited, but the indictor never turned positive.  So I stayed on the sidelines.

I have to tell you that when I saw GILD starting to move up past 59.30, I really wanted to pull the trigger.  It appeared that the stock was running away from me.  I was starting to get angry with myself.  Why were you waiting Hank?  GILD, a stock that had produced so many opportunities in the past for Rifle Trades, had been pulling back for the past 10 days.  It was EXTREMELY oversold.  Certainly this correction was enough.  It was down over 5 points from its 26 July high of 64.04.   Wasn’t a sale of 7 percent enough already?  Why are you waiting?   Hmmm?

I mention this today, because what happened with GILD yesterday is typical of what happens when you follow the indicators, and not your gut.  I have to tell you….I really wanted to buy GILD yesterday.  Even at 59.30.  I wanted to buy the stock!  But the DMI kept me out.

So this morning instead of owing GILD at 59.30, and feeling pain from more than a dollar loss, I’m comfortably on the sidelines, still watching.  And now I have an opportunity to buy it near 58.

Sometimes, when you follow the indicators, you pay a few cents more, as you wait for that last indicator to turn.  But when you do, it puts you in a position that you want to be in.  Those few cents extra enable you to see all Green on your chart..  And once you have Green indicators, you are in a much better position to manage the stock if the indicators turn against you.  But if you bought when only 2 of the 3 indicators were Green, what do you do?  If you didn’t follow the rules when you bought the stock, would you sell it if those two indicators turned back to Red?  Hmmm?   And if you didn’t, you got to watch the stock fall all day long.  And then at the end of the day, you owned the stock with Red indicators.

Trust me.  It’s a lot better waking up the next morning and knowing that the stock you are holding is Green on the 60s, not RED.  Like with SLB and TBT.  That’s why I wait for the indicators to turn and pay a few cents extra.  The feeling is worth every penny.

Remember too that we’re in a corrective wave 2.  In corrective waves, we mostly scalp and plan.  All of the breadth indicators are still negative and heading down.  It’s still not the time to be buying stocks.  But we’re 100 points closer to that time than we were yesterday.

SLV gained 0.36 cents yesterday as the metal starts to move into resistance and approach its target.  BTW, with yesterday’s move, SLV is now over 6 percent from when it turned positive on 9 August after a TLB Pattern.  I continue to mention this, not because I want you to look at buying things.  I don’t.  All I want to do is point out how much stocks move after a TLB or a THT Pattern.  I want you to become familiar with this pattern now.  It could become very important in the future :>)

Watching the indicators and planning.

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

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