Professor’s Comments June 10, 2016

Posted by OMS  at June 10th, 2016

The Dow fell 90 points early, and then climbed back to finish down 19 at 17,985.  Volume was moderate, coming in at 95 percent of its 10-day average.  There were 217 new highs and only 8 new lows.

Not much changed after yesterday’s trading.  Once again we saw how an overbought market without a trend in place usually results in a pullback. It’s hard to tell if the pullback is complete, as yesterday’s down-up move could have been part of an a-b-c correction. If this is the case, the market could be in store for another down leg today.

As long as the cockpit indicators remain positive, once the current correction completes, the Dow should resume its re-test of the 18,186 level.

The 2-period RSI Wilder on GLD is showing an overbought reading of 97.7 with a VTI of only 53.97 (No Trend), which mean that gold could also pull back today.  With gold and silver stocks leading the Dean’s List and gold appearing to be starting a wave 3 up, I am looking at any pull back in gold as a buying opportunity.  Also, as long as UDN, the inverse ETF for the Dollar remains on the Dean’s List, I continue to favor the upside for gold.

Same for energy.  As long as DIG remains on the Dean’s List, I will remain positive about energy.  Going into yesterday’s trading, energy stocks were showing overbought conditions.  For example, the 2-period RSI Wilder on RDC was showing a reading of 96.8.  So it was perfectly normal for the stock to pull back 10 cents on a difficult day in the market.  However, the VTI on RDC is now in the Trend Mode (75.47), so once the oversold conditions are relieved, RDC should continue to rally.

BTW, IF RDC continues to pullback today, it could form a small ‘Flag’ pattern.  Flags are actually the ‘Blades’ of small Hockey Sticks. They usually form at ‘Half Mast’ or the half way point of a move.  So IF a flag is developing on RDC, once the pattern completes, the stock could run another 3 points higher. 

Today’s Trigger Trades are:

Sonic Corp (SONC); H 30.24, L 29.27 – Favor downside

Petmed Express (PETS); H 19.10, L 18.80 – Favor downside

Synaptics (SYNA); H 66.99, L 61.82 – Favor downside

All of the above stocks have negative Hockey Stick Patterns and a VTI that is either moving down or already in the negative Trend Mode.  So IF the Low Trigger point is exceeded by one tick, I’ll be looking to enter the trade.

Again, because The Tide is positive, I am only looking at these stocks as trades.  Once the trigger point is exceeded, and the trade is profitable, I lock in a profit by taking some money off the table and then let the rest ride using stops placed neat the entry point.

The reason I want to keep a few shares active is because most of these stocks have very long ‘Sticks’ and narrow Bollinger Bands, which means that could run several additional points.  For example, the ‘Stick’ on SONC is about 8 points.  So if you subtract those 8 points from the recent ‘Blade’ high of 31.2, you get a target near 23. 

I’m not saying that SONC will fall to this level if it breaks its low trigger, but it could.  IF the current rally in the overall market truncates, and doesn’t re-test the 18,186 level, stocks like SONC could be among those leading the market down.

That’s what I’m doing,

h

Market Signals for

06-10-2016

One hour video recorded from May 28, 2016 The Professor’s Signs of a Major Market Turn – Prospectives and the Projected Timing and Levels One hour streaming video – includes webinar handouts The Professor usually holds an update class whenever the Market looks like it may be making a major turn. If you have been following the Professor’s Comments you know that a turn is due….. LEARN MORE

Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ

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.