Weekend Strategy Review November 30, 2013
Posted by OMS at December 1st, 2013
Last month, I spent a lot of time talking about how Apple, AAPL, had completed its turn -around process after a TLB Pattern, and then had its 50 cross the 200 to put it into an uptrend. I also discussed how it needed to pullback to form its Blade, and during this pullback, it would present us with several buying opportunities.
The 2-period RSI Wilder gave us two such opportunities, one on 7 November at 512 and another on 20 November at 514. Then last week, the stock started to break out of its Blade, closing at 566 on Friday.
I discussed AAPL during my AIQ webinar, and during my last Update Class at UNF. It is a classic example of how stocks turn around and should be studied closely. The turn-around process is one of the most reliable patterns I teach. It is also one of the easiest to learn and trade.
Again, what I look for in turn around candidates is a TLB Pattern. Then once I see the pattern, I buy a few shares when the PT indicators turn positive. These shares are a Trade Only! Then IF the stock ‘Jumps the Ropes’, there is a good possibility that the move is wave 1 of a new pattern. After the wave 1 completes, I wait for a pullback. As long as the stock continues to trade above the moving averages, it will pull the 50 above the 200 putting the stock into an Uptrend. Once this occurs, I just look for opportunities to buy it On-Sale, or when the 2-period RSI Wilder becomes oversold. It’s not complicated.
The reason I’m talking about AAPL this weekend is because many stocks are starting to develop the inverse of this pattern, or namely Three Highs to a Top (THT). In the months ahead, I believe there will be many more opportunities to trade this pattern to the short side.
Do I want you to chase AAPL here? No! If you took the APPL trade, you should now be paying attention to your target, and looking to manage your money. I won’t give you my target for AAPL, as I prefer that you calculate it yourself. However I will give you a hint. The ‘Stick’ started on 9 October at the 478 level. The Blade low was near 512. So just measure the length of the ‘Stick’ and add it to 512. Then start thinking about where and how you’re going to manage your money :>)
Remember, on Friday, the S&P hit my target of 1810 and then pulled back to close at 1805. I’m still watching the 1780 level very closely. If the SPX breaks 1780, it will likely trade down to the 1740 level or lower. Remember too that trading is all about risk vs. reward. The SPX has made several attempts to push through 1810 and each time has failed. So right now, the odds favor the downside, even though my Lists and indicators remain positive.
On Friday, Royal Gold, RGLD, only rose 0.29 cents while GLD was up 1.36 with gold futures considerably higher. While I was disappointed in the miners reaction, I still believe there could be a long trade in mining stocks in the days ahead. However at this point, even though I believe that gold could see a pop, I cannot buy any of these stocks until I see at least one or two of them hit the MWL. And if they do, I have to consider them as trades only.
So as I wait for the markets to roll over, my Big Picture Strategy is simply this: Relax, and wait for better opportunities. Remember too that the potential for battles over keeping the government running and the debt ceiling are now only 5-9 weeks away. At best, these battles should produce a few ‘Storm Clouds’. At worst….who knows.
In trading the markets, there is a time to be aggressive, and a time to pull back your horns. There’s a time when the odds favor you to trade, and a time when they’re against you. I believe that in both cases, it’s the latter.
Have a great weekend. That’s what I’m doing.
BTW, there was a ‘Small Change’ in the A-D oscillator on Friday of only 6 points. So we need to be on the lookout for a Big Move early next week.. Remember too that the positive Holiday and end of month bias will no longer be supporting the markets into next week, so please be careful.
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