By: Scott Redler
All you need is a crayon and ruler to trade this market if you believe in the wedge. During the last week or so the market has been building this wedge with great scalp-type trades. Shorting the upper end in the 1170 area, then buying into yesterday’s reversal in the 1120-1130 range, worked well.
Now we are headed toward an apex. The next stop will be 1145-1155. The question is: what will be next? As a trader we don’t have to see into the future, but simply watch the important levels. Yesterday around 3 we hit our target for the lower end of the wedge and shifted gears to buying strategies. You can sell some on this open or into the gap fill from Friday’s open if you’re feeling frisky.
Market is in day 1 of an attempted Rally as of yesterday (or what I call the RedDog reversal). Most indices traded through the previous day’s low then came back above for an outside reversal, although volume was a bit light. Now you need to look for a 1.6%-2% follow through on heavy volume within the next 4-7 days to confirm a new attempted rally. This might not happen, but it’s in our contingency plan.
There are some GO TO stocks that are building upper ranges and can help lead once again, but it’s not clear yet.
Those are
AAPL, BIDU, VMW, NFLX, CREE.
Other decent stocks to watch are AMZN and RIMM.
Banks are oversold, although Whitney came out to say she wouldn’t touch financials with a 10-foot pole right now. GS traded thru 141 early then helped to lead the rebound.
The Ags are oversold also, as is OIH.
Gold is in profit taking mode and I would look at the 10day moving average which is 118.66 GLD, and the 20 day looks like a better spot at 114.47.
