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As the market improved in January, I discussed the idea of digging underneath the surface and gauging the health of the market by the sum of its parts, instead of simply declaring a top because of gut feel. In this post, I noted that even beaten-down sectors were seeing much-improved price action and, perhaps just as important, buy volume. The clean energy, new age technology stocks fit that bill. Here again, the huge increase in buy volume seems to have foreshadowed the bullish turn of events.

Today, CLNE FSYS WPRT continue to break higher. Many had been discussing these stocks for a while now, but timing is important (pardon the coding mumbo jumbo).

I went long FSYS inside 12631 last Wednesday at $24.48. Specifically, this is what I wrote inside out chat room.

New Long: $FSYS @ $24.48. Stop-loss: Below $23.30. Full position. Breaking out right now and is a short squeeze/low float play. Earnings are 02/20 and I will sell before then.

02:57:17pm EST on Wed, Feb 8, 2012

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This morning’s price action serves as a pretty good lesson to traders who try catch every single market move, in terms of short-term tops and bottoms. In particular, when the market flashes signs that it is trending, it is usually correct to simply become neutral at junctures when the trend seems short-term exhausted, rather than fighting it via an outright bearish posture. Last week, it seemed as though we were largely consolidating through time rather than price, despite Friday’s gap lower. With the VIX spiking (especially TVIX), combined with financial publications and pundits turning bullish, many traders summoned their inner contrarian and felt inclined to call a top to the market. Instead, we gapped up this morning.

Even though some of the gap has been filled, there are overall plenty of charts that continue to act well and show no signs of topping out, such as ISRG and PCLN. True, issues like AAPL are too extended to buy here, but by and large this market has become more conducive to swing longs rather than swing trading shorts. Hence, my focus continue to be on scouring the long side for actionable ideas. A few names that I am long inside 12631 and working well today: FSYS JAZZ SAH.

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A few nights ago I wrote about the solar stocks being one of the laggards from the past few years. Specifically, I noted that they were almost out of the forest, as they looked to have turned a corner in favor of the bulls. High beta solar stocks like JKS TSL and YGE are screaming higher today, even after already moving higher in recent days and weeks.

The weekly chart sheds light on the situation, as we can see that TAN, ETF for the solars, has room to run to just below $4 before we are likely to see some supply hit. At that point, I would look for a constructive pullback and a higher low to form an inverse head and shoulders bottoming formation. In other words, if you missed the move in solars, there is no need to mope. The move could easily be getting started–It just requires some patience at this juncture.

Oh, and if you wanted to catch the move,  you could be inside 12631 with @RaginCajun crushing these trades day in, day out.

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The biotechnology sector continues to impress, as we are riding JAZZ Inside 12631 and have been for quite some time. Dendreon is a huge mover today, attracting many hot money players for the big technical breakout. In addition, keep an eye on HGSI to follow suit, as it may be on the cusp of that secondary breakout from a tight consolidation.

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We have a soft open this morning, with most issues and sectors starting off in the red. After piercing the upper Bollinger Band last Friday, the most logical path for the S&P 500 would appear to be lower on a pullback. I locked in some quality gains on Friday, while ridding the portfolio of laggards into that big move higher. However, the market often defies expectations of reasonable traders, particularly during trending periods. In other words, a deeper pullback than a mere soft open is far from a given at this point.

Bull runs tend to be characterized by soft opens and strong closes, which is usually the sign of institutional buying and retail confusion. I gave you several long ideas that were not yet extended over the weekend here and other ideas for members inside 12631. In doing so, the strategy is to be prepared for the dip-buyers on the horizon making another go of it by the end of today’s session. Bear in mind, we corrected from 1333 down to 1300 on the S&P over the past two weeks. So, it is not as though we have gone straight up with no corrections at all.

The persistence of dip-buyers should never be underestimated during trending markets, due to the consistent success that they enjoy. It is only after they suffer several defeats should that they will consider throwing in the towel. Taking an objective look at the price action over the past several weeks and months, we are nowhere near a situation where the buy-on-the-dip crowd is likely to shy away.