My favorite trade is the first pullback after a big thrust higher. The more violent and unexpected the thrust was, the better. One of the best ways of identifying the magnitude of the initial thrust is by using a momentum indicator. Many use the RSI, I prefer the CCI. If you look at how CCI is calculated you will understand how its oscillations reflect momentum.
I started buying FB two Fridays back perhaps a bit overzealous sure, but it wasn’t a full position because the stock had not pulled back into my honey hole. Well here we are today, in the honey hole. Now I didn’t buy any shares today, and I may not buy any tomorrow, but should we see STRENGTH of rhinoceros proportions I want a full position and will add.
Completely aside: I got creamed for a good 2% loss to my portfolio earlier in the year exhibiting my voodoo on the thirty three level as if it was any semblance of support the day after IPO. I learned my lesson, and @chessNwine made sure to iterate that we should wait 3-6 months to get a better technical picture of IPOs. Thus, I am patiently waiting to buy shares in lifestyle brand RH which I can assure you will be in my portfolio in 2013. Developing…
Note the angry bear’s laser like focus on the honey hole: