Thursday, April 24, 2014

Market Frustrating Traders Inter day Volatility High

A one percent higher opening on the back of strong earning's reports from Apple (AAPL) and Facebook (FB), turned into a major sell off in higher volume at the opening bell. But by ten o'clock, the market found its footing and slowly retraced about half the morning losses over the next hour, and traded in a tight range for the remainder of the day, closing higher in heavier volume. What could have turned into follow through day if the early gains held, turned into a stalling day by the close.

Leading growth stocks just can't seem to get out of their own way. Most remain near the bottoms of their consolidations trying to round higher, but none have managed to break higher. Even stocks that resisted the correction and have advanced into new highs, have not made much progress and volume leaves little to be desired. But, as long as leading growth stocks are able to hold these consolidations, they can withstand another wave of index selling without breaking apart.

This market is a trader's worst nightmare. Neither side, long or short, can follow through without a major shakeout threatening and/or derailing the new trend attempt. Tight stops keep getting hit, but, proving to be the right move. Traders must keep positions light and stopped tight. Allow positions to get stopped out on tight stops, and hold those that do not. Protecting from major losses in case the correction resumes, and still being invested if the rally continues. It's never easy...ever!


Baidu (BIDU) broke out from a bottoming cup and handle base in July of 2013 and appreciated over eighty percent. A recent breakout attempt out of a faulty v-shaped, sloppy cup and handle base, in well above average volume, failed. The stock is now in the process of forming the bottom of a cup shaped base ahead of earnings tonight, April 24th. A breakaway gap could appreciate to fifty two week highs. Caution is warranted, recent gap ups have been quite volatile.

Walter Investment Management (WAC) broke down from a head and shoulder pattern at the beginning of the year and declined over thirty percent. The past two months the stock has pulled back to its fifty day moving average, in low volume, for the first time since breaking down. The stock has stalled at the moving average three times and has been rolling over despite the market's recent rally attempt. Earnings are expected May 8th.

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