We are at a point in this market where traders have to become increasingly concerned with risk they are taking on in their long positions. Here's the thing, we have two negatives for this market in terms of being oversold/overbought. First we are trading well outside the Bollinger Bands after Fridays close. Secondly we have traded for six straight days higher - a very difficult feat. Seven hardly ever happens, though we were up eight straight days earlier this year, but it was no where near the size of the move that we have currently seen.
On the flip side, the short trade has been nearly impossible to succeed at if you are looking to hold trades for more than just one day. The market is being supported by Benny's ongoing POMO operations and that's an extra $85 billion per month being pushed into interest baring assets and driving investors into equities as a result. So the dip buying you constantly see is a result of these Fed interventions.
While I'd like to be more active in this market, I realize the need to let this market come back some before I can legitimately add any new long positions. I remain hedged for now, but hoping that the market will eventually let me change this status.
The long watch-list to the right offers some solid setups. However, the long-list isn't that long, primarily due to me taking off a number of stocks that have gotten extremely extended to the long side and no clear 'edge' on the trade any longer. As a result, I have had it removed. From the list, here are my favorites:
Healthsouth Corp. (HLS) - breakout play, that could be sustained for a good week or so if this market relentlessly pushes higher.
Whiting Petroleum Corp. (WLL) - consolidation over the past month but it too looking for a push higher as well above $50.80.
Hovnanian Enterprises (HOV) - Double Bottom and consolidation just below the neckline - I like it long above $6.20.
Ryan (@shareplanner) specializes in swing trading strategies and is the founder of SharePlanner which he created to help and teach others on how to trade stocks better using multiple approaches and time frames. Each day you can count on Ryan to provide his trading advice as well as transparency in every trade that he makes. Ryan Mallory resides in Central Florida. More >>
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