Strong Accumulation Pattern in NILE

One of the most important factors I look for in selecting a stock to trade is a stong accumulation pattern. NILE is a good example of a stock under accumulation. Take note of the strong volume on up days versus the low volume down days. This is our first que that the stock is under accumulation. Next we see that all volume related indicators are sky high. Finally, price has moved as we'd expect with this type of volume pattern, up around 30 points since early July.

SGR Lookin' Like a Dead Cat

Shaw Group Inc. (SGR) is a former high flying stock that seems to have lost its mojo. In July, the stock gapped up after a long uptrend, but could not hold the gap level. It now looks like the gap was an "exhaustion gap", which usually comes at the end of an uptrend and signals a downswing.

SGR is in the midst of what could be a "dead cat bounce." As a short play, I like the fact that the bounce towards the 50 day moving average has been on low volume. Take a look at the recent volume pattern I highlighted on the chart; lots of high volume down days sprinkled with a few low volume up days. This is a bearish volume pattern.

This is a great short play that I wish I had entered at the close today. If I see price strength on weak volume, I will likely give it a go tomorrow (as long as price does not cross the 50 day moving average without moving back down).

Trade: UA

I sold 400 shares of UA at $69.10 (entry at $63.65) for a $2180 gain (+8.56%).



Considering the stock closed at $66.68, I can understand if someone reading this rolls their eyes at what looks to be perfect timing for exit. Please note that I left a comment regarding the exit in the the previous post (I did not have time to create a full post at the time).

I had two reasons for exit. One, the stock was right at my initial target of $69-70. Two, There was not enough volume in the stock or the market to think this was a momentum breakout that would lead to more upside. This is also the reason I added to my MS short.

I still like the stock and it currently resides at the top of my primary watchlist. I will likely enter if we get a little more of a pullback.

So What if There is Light Volume

Many commentators around the blogosphere have pointed out that recent gains have been on light volume and should not be trusted. Rev Shark, an excellent trader, makes this point on his analysis of yesterday's charts. While I respect this analysis, I could not disagree more. It's a holiday week, people! Of course volume is going to be light. Until we see a strong move to the downside, or some major resistance point violations, I'll continue to go long without worrying too much.

I still feel we have a strong market short term, and today is a good example the market's strength. In a weak market, the Shanghai "plunge" would have had a decimated the U.S. market. Instead, we had a light selloff that the market shook off with relative ease.

Note that my bullishness short term is not a sound off to go long with reckless abandon. While I am long, I will continue to honor my stops and have short strategies ready if there is a reversal.