Feb 1, 2005

What I like

Click on a chart to see a larger image!!

Posted by Hello

These three charts are basic strong price patterns with medium term uptrends and short-term bases that are being left behind on improving volume. Sometimes in a pullback like we have been through I end up focusing on all the stocks I used to like that have just gotten cheaper. For longer-term trades with fundamental support that is okay but even then it is probably unnecessary.

For me, I have found that focusing on stocks in strong patterns is better than stocks that are suddenly cheap. This goes against my instinct that a stock that loses 10% today can more easily earn 10% tomorrow when the market bounces. Sometimes they do but more often, I let the old price become a target. It is best just to immediately shift my focus to stocks that are working with nearby support. Bounces and reversals are best left for daytrades.

In an environment like we have just gone through the best stocks are those that have consolidated near highs. They were stronger than the market during the selloff and they will be stronger if a broad rally resumes. Like AUO they need not have been particularly strong during the last rally they only need to have held on to their gains during the selloff.

Lastly, it is a combination of the pattern and the market that create potential. If the market falls strong patterns will usually hit stops too. It never hurts to notice the patterns and be ready but without underlying faith in the market it is best just to stay clear and wait.

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