Wednesday, June 02, 2010

NASDAQ Follow Through Confirms Rally - 2007 Precedent Intact

The 2.64% move on the NASDAQ, on higher volume then yesterday, confirms the current rally attempt on day 5.  Two new breakouts, VIRL and THOR, joined the ranks of breakouts.  Further adding confirmation to our bullish stance since the market reversal on 05-25-2010.

Yesterday's sell off back to the 200DMA acted as another great shakeout. If you look at the 08-2007 chart (below) alongside the current NASDAQ, you'll see that the NASDAQ had a similar shakeout back to the 200DMA the day before the follow through day on 08-29-2007 (Black Arrows).

In the current environment you have to be looking to buy pullbacks as they start to turn up. Shakeouts after breakouts have become commonplace.  If you do buy a breakout, you might consider taking a smaller position and wait for the pullback to add.

Continue to keep in mind that this will be more of a tradeable rally then the start of a new prolonged move higher.  Stick to buying the high relative strength names with a proven track record of moving (APKT, NFLX, VMW, SNDK, AAPL, CSTR, ASPS, ISRG, etc...).

The market won't make this leg too easy.  Expect more shakeouts along the way.  Figure out your uncle points ahead of time and place your stops.  It is too easy to let a stop slip when they are held mentally. 

Stay calm and patient, and don't let those greedy emotions get the best of you.


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