A good day to buy?
The market has been looking to pull back all week, and I think it's consolidating before another run up.
In early February, the DOW bounced around 10,800 and then shot up to 11,000 without a backwards glance.
It spent 19 trading days bouncing around 11,000 before lunging for 11,200. Throughout this period, the DOW would hit 11,100 before pulling back and closing around 11,000.
Since March 15th, the DOW has been solidifying around 11,200. It has been at this point for 17 trading days.
Now, here's something interesting. I looked at the daily trading volatility (the range of high and low in the DOW).
Before jumping to 11,000, the DOW had 8 out of 9 trading days with volatility around 180+ (the first 2 weeks of February).
After hitting 11,000 the DOW volatility fell and hit 180+ ranges when it fell below 11,000 and rebounded (March 3rd and 6th - Friday and Monday). Essentially it trades as low a range as 42 and generally around 150 or lower.
My point is, once the DOW hits a number, it will face resistance. That resistance is experienced as a large trading range because the level is being tested. What that really means is that a lot of folks are cashing out and taking profit and a lot of folks are buying because they think the market is moving up. When the level holds firm despite the volatility and pressure, then we have consolidation.
When the DOW lunged from 11,000 to 11,200, there was some but not much volatility. The trading range was around 160. However, 3 of the last 8 trading days have been ~180.
So that's my thinking about consolidation. Now, why do I think the market is about to go up?
Partly because the daily highs have been around or above 11,300 on 13 out of 16 of the last trading days. The DOW wants to break out to 11,300 and keeps falling back.
So a Dow ~11,100 (today) when we see that it really wants to go to 11,300 is a buyer's opportunity.
What do I like? Anything that has pulled back >3% or not at all. Strong pull back is a buyer's sign. No pull back means that the market really digs this stock.
Of the stocks that I follow or own, that would include:
Strong pull back: CELL, TIE, JLG, TTI
Minimal or no pull back: ET, GHL, NUAN, STX, PCP, ESRX
In early February, the DOW bounced around 10,800 and then shot up to 11,000 without a backwards glance.
It spent 19 trading days bouncing around 11,000 before lunging for 11,200. Throughout this period, the DOW would hit 11,100 before pulling back and closing around 11,000.
Since March 15th, the DOW has been solidifying around 11,200. It has been at this point for 17 trading days.
Now, here's something interesting. I looked at the daily trading volatility (the range of high and low in the DOW).
Before jumping to 11,000, the DOW had 8 out of 9 trading days with volatility around 180+ (the first 2 weeks of February).
After hitting 11,000 the DOW volatility fell and hit 180+ ranges when it fell below 11,000 and rebounded (March 3rd and 6th - Friday and Monday). Essentially it trades as low a range as 42 and generally around 150 or lower.
My point is, once the DOW hits a number, it will face resistance. That resistance is experienced as a large trading range because the level is being tested. What that really means is that a lot of folks are cashing out and taking profit and a lot of folks are buying because they think the market is moving up. When the level holds firm despite the volatility and pressure, then we have consolidation.
When the DOW lunged from 11,000 to 11,200, there was some but not much volatility. The trading range was around 160. However, 3 of the last 8 trading days have been ~180.
So that's my thinking about consolidation. Now, why do I think the market is about to go up?
Partly because the daily highs have been around or above 11,300 on 13 out of 16 of the last trading days. The DOW wants to break out to 11,300 and keeps falling back.
So a Dow ~11,100 (today) when we see that it really wants to go to 11,300 is a buyer's opportunity.
What do I like? Anything that has pulled back >3% or not at all. Strong pull back is a buyer's sign. No pull back means that the market really digs this stock.
Of the stocks that I follow or own, that would include:
Strong pull back: CELL, TIE, JLG, TTI
Minimal or no pull back: ET, GHL, NUAN, STX, PCP, ESRX
posted by Andrew at
10:16 AM
2 Comments:
are you saying that we are looking at DOW resistance at 11100 or 11000 now? ~VK
Yes. I think we're testing resistance at 11,100 before making a firm move to 11,300.
I am paying attention to the trade volumes - there isn't dumping and mass exodus.
GHL, TIE, GRP, JLG, JOYG, MDR, ntri, STX - down on significantly less than average volume
I bought TIE calls today. Wish me luck!
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