The U.S. market indices remain at elevated levels, trading inside a tight, parallel channel with hardly a hint of a pullback in the offing. In the last 8 weeks the S&P 500 has only had 2-3 days of minor distribution, December 28, and January 26 and 31. Given that, my time frame for trading continues to shorten, my position sizes are smaller, and my stops are a bit tighter.
The lack of volatility and lopsided, upside bias of the market over the last 8 weeks is nothing but stunning, especially after the extreme intraday market swings we saw in the latter half of 2011. It's as if the bears and sellers have been banned from the market. Nonetheless, we always trade what's in front of us with a cautious eye and with prudent portfolio management techniques.
So while I continue to play the market from the long side, know that this is most definitely NOT a time to be complacent or lazy in your trading tactics. A correction can creep up very soon. One small sign of weakness is the transportation index, which has not been confirming general market strength over the last 3 days.
There have been quite a few winners from previous setups mentioned in this blog. ValueVision Intl. (VVTV) has been the most recent gain for me as I booked partial profits Wednesday morning in the low $1.90s from a $1.61 buy last Friday. The stock finished strong to close at $1.97 on increasing volume.
Here are a few setups on my screen of stocks trading a minimum of 200K shares/day and priced under $10. These low priced stocks offer big potential moves, but are also MUCH riskier to trade.
Don't trade these stocks unless you understand risk management and use stops to limit your losses. I use these setups for short term trading only, where I usually book partial gains after a 6-7% move, and then sell the rest when buying pressure abates. ALWAYS use stops to limit your losses.
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