May 062013
 
S&P500 daily at end of day

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
A quiet day for stocks as they closed modestly higher on light volume.

MARKET SENTIMENT
Neither buyers nor sellers showed up in force following Friday’s breakout.  A large part of this market’s strength derives from a core group of confident holders who hold through thick and thin.  They were not spooked by recent volatility and are uninterested taking profits after Friday’s record close.  As long as these holders continue holding, it keeps supply off the market and makes it far easier for the rally.

TRADING OPPORTUNITIES
Expected Outcome:
How much longer this can continue is anyone’s guess, but there are no signs the market is weakening or running out of buyers.  Stick with what is working and as long as we continue making higher-highs and higher-lows, we have the green light to own stocks.

This market often takes a step back after making new highs, so don’t let that catch you off guard and certainly don’t short it for anything longer than a day or two swing trade.  Work under the assumption every dip will bounce until it doesn’t.

Alternate Outcome:
Sell in May has been a thing for the last three-years and there is nothing to say we cannot make it four in a row.  Stay vigilant and watch for lower-highs, lower-lows, and breaking support.

Trading Plan:
Expect near-term weakness, but the best trade is owning this market as long as we hold 1590.  Buy the rebound above 1590 and use 1590 as a trailing stop-loss.  The next support level is the 50dma, break that and 1540, and there is a lot of clear air down to the 200dma.

AAPL daily at end of day

AAPL daily at end of day

INDIVIDUAL STOCKS
AAPL had another good day and is up nine of the last eleven trading days.  $75 in two-weeks is an impressive stretch.  At this rate it will be back to $700 by late June.  Sounds plausible doesn’t it?  Of course not.  Not even the most rabid bull would believe something like this.  If we all agree the rate of gains cannot continue, then we must decide where and when we will slow down and even pullback.  $470 is a major peak and a significant challenge for the stock.  This is the stock’s first chance at setting a higher-high in over half a year, but the rebound might run out of gas just as we get there.

Unless someone believes in the $700 by July trade, now is a decent time to consider locking in gains and is a poor place to buy more stock.  Wait for support at the 50dma to add to your position.  Failing to hold the 50dma shows big money is not supporting this stock and it will likely make new lows before this is all done.

AMZN slipped back to the 50dma.  A bear needs to be patient and persistent.  Take small losses and eventually you will hit the home run.

LNKD is finding support at the 50dma.  We are still waiting for the high volume bounce to show buyers continue supporting this stock.  There is more upside left, the only question is if the near-term selling is done.  Wait for the stock to tell us.  We will miss some profits, but it dramatically reduces our risk by waiting for the confirmation.

Plan your trade; trade your plan

 Posted by at 10:46 pm on May 6, 2013

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