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All,
A very volatile week. With the positions I opened during the week, I'm
still over 50% cash and wondering what I should do. Looking at the NASD OTC
index, this could either be a great tech stock buying opportunity or the
start of a major sector rotation. It hit a new all time high early Tuesday
near the mid point of its Intermediate Term Up Trend Channel (ITUTC).
Shortly after Tuesday's open, it reversed and fell like a rock until Friday.
It tried to rise Friday but ran out of gas late in the session. All that
activity left it in a Short Term Down Trend Channel (STDTC) in the middle of
the lower half of its ITUTC. My binary wave and RSIStoch indicators are
flat near the zero point, but do have a slight upwards bias. I'm betting
the ITUTC will hold and the STDTC will break, but want to protect against
the opposite <G>.
Looking at my open positions, I have a computer retailer, an oil
driller, a software company, and a broker in my stock portfolio along with
LEAP call options on a computer manufacturer and a drug stock. I'd like to
add an internet company and a retailer. However, I'm only going to buy on a
bounce off the bottom of an existing channel. My strategy will be to look
at stocks that are falling towards the bottom of an existing channel. When
it gets close, I'll place a good until canceled buy stop order above its
current price. Then if it does reverse and move up, I'll automatically buy
when the buy stop is hit. If it closes below the bottom of the channel,
I'll close the buy stop and move on to another stock.
The internet stock I'm looking at is AOL, but it is too far above the
bottom of its channel to place a buy stop yet. It closed at 142.8 and the
bottom of the channel is at 122. I want it to be closer than five points
from the bottom of the channel and I'll place a buy stop five points away.
However, given AOL's recent volatility, that could happen any time during
the next week.
The retailer I like is WalMart (WMT). WMT closed at 46. It is in a
standard deviation ITUTC with the top (deviation at 2) at 63 1/2 and the
bottom (deviation set at 1) at 46. It set a new all time high in early
April then pulled back to the bottom of its ITUTC in mid month, moved back
to mid channel and is now testing the bottom again. The StochRSI indicators
aren't much help. They are fluctuating in slightly negative territory which
could be setting up a new buy signal but that may be wishful thinking <G>.
I'm going to place a good till canceled buy stop at 47 1/2 which is just
above Friday's high. If it closes below 45 3/4, I'll cancel the buy stop.
If I do get the position, the target will be 63 and the stop will be 45 3/4.
I'm sending a copy of NASD.GIF and WMT.GIF charts to everyone on my
email list.
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