Sunday, April 05, 2009

Monday's Game Plan and Market Notes

Here is my plan for the market this week. The member only "Trade Report" also included my focus list, consisting of the stocks I plan to trade if we get a pullback.

Market Notes:

As I noted last night, the cup and handle pattern emerging from a bottom formation looks good. While it may not be a true bottom, it at least gives an intermediate term clue. The market is nearing short term overbought, so I do not feel comfortable adding longs here. I am waiting for a dip.

If the market continues to inch higher towards near term resistance, I may enter a quick short trade in anticipation of a pullback. If the pullback does come, I would expect a move to support and then resumption of current trend (higher). Thus, my stop on any short trade would be tight, and target near support.

If we get a pullback before becoming extremely overbought (we are currently only slightly overbought), I'd like to start adding positions once SPY hits the 79-81 range.

If we get extremely overbought, I would add shorts in the 85-86 range, with a stop around $88.

How overbought is this market?

Take a look at the T2108 indicator (stocks above 40 day ma) and the answer is clear: we are nearing extreme overbought levels. A little more bounce would get is near 90, which is where I would look to short.

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