________________________________
I have considerably slowed down the pace of my trades over the past few weeks. Despite the broad market making new highs, the follow-through to many breakout plays has been somewhat lethargic. Beyond that, we know some areas of the market are very extended at this point. Of course, the leaders can continue to melt up, and my small shot at an Apple short was fairly quickly run over by the bulls this morning.
Rather than making a “hero trade,” the idea was to put on a small Apple short based on the weekly gravestone doji candle last week. If successful, I would short more. If wrong, I could quickly cover the smaller-than-usual position. That is the best way for me to play an occasional contrarian trade that I throw on. At any rate, I still think that the risk/reward profile on the long side for swings is unfavorable up here for a bunch of those extended market leaders.
Overall, I remain net long albeit with a higher than usual cash level in my portfolio, completely transparent inside the 12631 Trading Service. The biotechs are still acting well, including MDVN, a seasonality favorite in The PPT that I profiled here. I am also long several stocks in the materials space, and looking for that group to continue to see rotation. That said, I am ready for just about anything and positioned accordingly for it, including a 3-5% correction which more and more traders seem to be dismissing as impossible at this point.
