Black Again?

The markets continued their slow drip higher last week to the confoundment of the many traders that keep calling for a near term top. Just like the roulette players I described in one of my previous entries, many of the traders I've seen on the twitter stream are starting to crowd around the “table” licking their chops at the prospects of catching the end of this streak we've been on over the last couple of months.

A chart showing the recent action in QQQQ illustrates this scenario perfectly as it has now printed a new high 8 days in a row. To exacerbate the feeling that we are now reaching a short term top, it also accelerated its uptrend by breaking out of an ascending channel. However, while this type of move typically fails, shorting the market has been a loser's game to this point while those playing “with the streak” have been amply rewarded.

Until this rally fails, my strategy will continue to be taking cautious shots to the long side while locking up profits quickly instead of letting them run. However, I will not be blindly bullish, and will have tight stops on most of my trades.  In the event that we get a retracement, I will sit out and observe the action instead of trying to short this market as I feel the conditions are ripe for a nasty bear trap once we do pull back.

Below are a few charts that are setting up for a continued move higher as long as the markets cooperate.

After a strong move to new all time highs, Brigham Exploration (BEXP) entered a period of consolidation after failing to find buyers above the $28 area. It has now had sustained price action above this level for two days, and looks ready to resume its upward ascent. Because it is at all time highs, traders don't have to worry about nervous holders hoping to get back to break even as pretty much everyone holding this stock is “in the money”. Watch for a break above the highs from the last two days.

Ultra Hair Salon (ULTA) is another stock trading at near all time highs. It had a strong move on January 6th, and has been flagging in an orderly manner with its range steadily contracting. ULTA should have fairly decent short term support at around $36.50 while a break out above Friday's highs should lead to a retest of $38.

MAP Pharmaceuticals (MAPP) has been flagging just under $17 after a strong run up from $14. Its range has narrowed considerably over the last few days, and is poised to move strongly in the near future. Watch for a move above $17 on volume. Keep an eye on overhead resistance around $18.50 to $19.

If you have any questions or comments, feel free to contact me on twitter @stockdarts or in our great chat room if you are a stockguy22 member.

Posted in General Trading