Monday, August 04, 2008

Another Selloff Hits The Market With Volume Well Below Average But Doing Just As Much Damage As Heavy Volume Would

The stock market indexes all continue to trend below the 50 day moving average with the 200 day moving average trailing right behind it. This is the most bearish possible scenario for the indexes to be in and looking to go long stocks with the indexes setup like this is just asking for trouble. However, the worst possible other factor is finally being relieved. I was not making money in my shorts recently with the market in this negative position but now my shorts are doing well and even the shorts that I lost due to reversals that were unexpected are doing very well.

This just goes back to underline how important it is to have guts. If the stock is breaking down on huge volume, with the indexes in clear downtrends, it makes sense that as long as the stock is within 20% of its old highs as long as the pattern is right then it makes sense to get short. I will be looking to get short as many mining, oil, metal, ag, and other stocks that have been rising since 2001 that are starting to show topping patterns.

Some of the most recent interesting stocks that appear to be topping since the oil stocks destruction has been the chemical stocks. Today the stocks TRA, MOS, POT, SQM, CLF, and AGU are all giving clear major topping and reversal signals. These charts have appeared to be topping before, especially TNH. However, TNH definitely looks to be rolling over now and if volume picks back up then I am sure this stock is dead. The problem is that unless these stocks give me a low volume pullback to the 50 DMA followed by another move through both the 50 and 200 on strong volume, I am sure I will be getting short quite a few of the old chemical leaders.

No matter how these play out unless this turns into another secular long term bearish market I will just be waiting patiently heavily in cash while making the proper trades in select longs (like medical and food stocks right now) and short the right stock that are ready to rollover and breakdown like a certain shipping stock i shorted today for a huge gain in one day. Also there have been some great very green medical longs that have produced 8% gains in one day. So it is just about being a really good stock picker. There are not going to be a lot of people that make it out of this tough market in tact. I am sure I will be just fine.

The only thing that continues to shock me is not that fact that none of the max green BOP charts are showing up. Even in other bear market there were some bullish sectors that had some nice charts with max green BOP and heavy volume accumulation. Stocks like GNSS were big winners in a bear market rally and hopefully we can get one of these soon.

Right now most stocks are breaking down and I know I keep saying the same thing but I have to make sure that we all have as much money as possible to use when the market is ready to go back into the 2003 mode that left us with so many stocks up 100% to 1000% with green to max green BOP charts that it moved into 2004 stick with CANSLIM stocsk. Remember, IST, AAPL, GPIC were all HUGE winners in 2004 which then led into 2005 with BOOM and ERS. That is when the HUGE gains stopped. The next big winners ranged from HRZ to PDO. They were not the same kind of power and they were not as easy to find and as “for sure” of a selection. But God knows that if we handled 2007 and 2008 so well that when the next bull market comes I am going to do the same thing to it that I did to 1999 with CMRC, JDSU, QCOM, LMLP, PARD, CAMP, NEWP, and so many others and 2003 when TASR, USNA, LCAV, EGHT, HIL, FMDAY, and so many other max green BOP beauties made me a small fortune. This time I will not party it away. Discipline now effects my whole life. We need more stocks to show up like EMIS, OFI, and VRUS in CANSLIM quality stocks before I get too excited. For now, cash is king, be careful out there, and I know I keep saying this but do not go long unless the chart is perfect.

A perfect uptrending bull market will come again and it will be easy to make money on the long side again. Right now is not that time. Please, be patient IT WILL PAY OFF!!! Aloha and I will see you in the chat room.

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