Wednesday, March 7, 2012

Looking for a higher low

Not sure what to think of the price action today; other than it just didn't have the "flow" that makes me think we are out of the woods yet.  If we can put a higher swing low in from the low of the sell off (1340) in the range of 1343 -1347 area and digest the price action in an orderly fashion i will gain more confidence in resolving to the upside.  Sure the market can just climb right up without backfilling, and that is a scenario, but it just appears after reviewing many charts that there is some better support areas on stocks that need to be tested.  It could also be that there is just too strong of a bid in the market to let let some of the stocks to reach decent levels of support.  This makes me wonder if there will be some divergence between the performing stocks and laggards - as some stocks will start drifting lower until they eventually end up testing good support levels.
 At least the price action resolved to the upside today; and more than likely kept me from getting stopped out of a couple of stocks i shouldn't be in anyway.  Which brings me to the topic of sector performance.  Without it, one is fighting a losing situation.  Regardless of how well the technicals are set up on a specific stock, if the sector is under pressure as a whole - for fundamental reasons or otherwise - you are at risk to losing money.  Such is the case for the metals group at this time.  FCX and CLF are due for a rebound, but the sector has not turned.  With that said, i am still long both of these stocks at current levels, but am not willing to ride them down either (done that before).  CAT performed well today as well as the auto parts ORLY; which i am long both of these.  If all of my picks performed like these have life would be much less stressful.  That makes me think of what my ultimate stock portfolio would be if i could buy the stocks at the right price.  Thinking about this i found it wasn't hard to imagine the list;  CAT, ORLY, PII, CF, NKE, EBAY, ITW, CMI, JPM, V, ISRG, FFIV, AAPL, and an oil or two, possibly CVX or XOM, and maybe an oil service like SLB.  I could expand the list, but that would be diversified enough for me.  If it wasn't for the diversification, i would add an AZO, LKQX, WBC.  Thinking about this, it made me think; why haven't i taken advantage of selloffs and got my butt into these stocks more?  Somehow or another as things unfold i end up taking marginal positions in companies that are sub par to the above listed ones; usually because they are easier to catch on sale (and is why they don't perform as well).  As i become more experienced in understanding myself and how that relates to my trading i become more capable of making decisions that will give me the results i truly seek.  Sounds elementary in theory, but in reality it takes much more to turn the lessons learned through failures into a success.
Well, enough for the personal rant for the day, i'll leave this evening with a simple chart showing the selloff and a scenario which i will  be looking for.  Remember to always make the observations of the price action first, then to lay out the possible scenarios going forward based on historical evidence.  Even though i am only showing one scenario this evening, there are many that i try to anticipate, and serves a person well to know what they would do in each of them.  Have a great evening!

                                                                                                 click chart to view

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