We are putting the finishing touches on another solid week of blocking out the noise and emotions of the moment inside the 12631 Trading Service that @RaginCajun and I direct. You simply must put in rigorous work on a daily basis to stay on top of a market that can change character quickly. With that in mind, the pullback on the senior indices this week was met with a noticeable uptick in bearish sentiment. And yet, plenty of individual stocks have consolidated on light volume, and more than a few are being permitted to break higher today, including my Amazon.com long. While no guarantee of a further bull run, the selling this week was of the mild variety, and not nearly enough to push me off my longs.
I will reserve the rest of my analysis for members of my Weekly Strategy Session product. In last week’s editions, I discussed the idea of judging whether individual breakouts are permitted even as the indices correct. In fact, unlike during the 11% correction we saw earlier this summer, that scenario is more conducive to a healthy market with staying power. Here is what I wrote:
We want to see not a loud, violent disagreement between bulls and bears reflected on the charts (which would be represented by loose and sloppy chart patterns with wild price swings), but instead simply boring, benign consolidation. That latter scenario of quiet digestion is far more likely (but still no 100% guarantee) to produce lower risk, higher probability entry points to long trading setups for traders who have been patiently waiting for them…even if the senior indices correct sideways or slightly down, a healthy market will still permit a fair amount of individual stocks to break out.
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