In my video on Friday evening, I discussed the idea that just because the market appears to be extended, it does not negate the likelihood of further upside. While many bears are championing the idea of a better risk/reward profile via shorting the current situation, I urge you to recall the February through April rally of this year, where short-sellers were relentlessly squeezed during the latter half of the run from 1150 to 1219. Seeing as the market has given many indications that it is now trending, as opposed to oscillating in a range-bound state that it was during late spring and all summer, my main focus is to resist the urge to call an inflection point.
At some point, this market will see a sharp correction, regardless of whether that dip proves to be an excellent buying opportunity. However, actively positioning for a sell-off in the midst of a potent bull run is a dangerous game of chicken to play with Mr. Market. With the small-cap led Russell 2000 closing higher each of the past five weeks, I believe the correct strategy coming into this week is to keep one eye on my individual holdings, with the other on the broad indices. Should the S&P 500 blow off to 1200 this week, I would be looking to lock in short-term profits across the board. However, should the S&P churn sideways, I would feel compelled to hold my winning positions, as the market seems hell-bent on correcting in time rather than in price.
Below, you will find my top setups for the upcoming week. Feel free to pick and choose whichever ones best fit your style. Please keep in mind that these are trading ideas only. I also urge you to use stop losses in order to mitigate your downside risk. In general, I prefer a trailing 7-8% stop loss, unless otherwise indicated on my annotated charts.
I hope you find these ideas helpful.
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Great analysis as always. I would love to add some of these next week, but have to wait until I sell something as my port is maxed out right now. Also, I’m holding shld.
Thanks for all of your work and I enjoyed reading your Vegas story.
Thanks, Hawaii.
Thanks Chess
Am in WPRT as well ,
like the look of ONP, I think the
china small caps still have room to run.
CTFO is my current favorite
I agree. They appear to have just gotten started.
Enjoyed Vegas I, well done and looking forward to Part II. Also glad for your continued success with your picks.
Your common sense analysis is helping. Joined you on several trades and taken your advice to be patient with the market: take some profits, but no panic to sell. Your blog has helped not to “over think” my positions. Aware that recent losses have a tendency to make me pull the trigger too soon with gains. Your approach has assisted me to understand that “Mr Market” does not care what happened last week or last month. I have reduced my “fear” and learned that when the market melts higher it is a good opportunity to be in it. It is often difficult to pick a top. With stops set, my downside is limited.
Like the setups for this week, I am in RGS and WPRT. Agree both look ready to pop. Looking for more China plays, recently took some profits and bought starter on MY @ 11. ONP looks like it could move up nicely. Current positions: Invested 70%, 30% cash.
Good day last Friday, owned GOOG and AAPL. Bought AAPL on recent dip at 278 on 10/4 and bought GOOG on 10/23 (thanks RC).
Chess, you are amazing! Thanks.
Awesome. Happy to see you are doing well, Bill.
Can someone give me an opinion on NIV, with a P/E ration in the 3? Notice the close Friday.
Wouldn’t chase it here.
Well it’s still up today!
So Chess……Regarding WPRT, is your position based solely on what you are seeing in the charts or does the company have a good product in high demand along with being well run? I haven’t been hearing much scuttlebutt around the sites I visit that would indicate a good demand for their field of expertise. Alternative energy stuff seems pretty dead with wind in particular ready to take it in the shorts.
Chart.
Thank you kindly for the response my good man.
Picked up some SHLD on your PPT post. Thanks
Let’s hope it gets going soon, Bernie.
hi chess,i am following your blogs for a few months and it helps me a lot in trading..i like your setups for week very much…how u find the chart pattern like u show here?is it by screening the stock chart one by one?
I use The PPT mostly.