If you went short on Thursday, you were licking your wounds on Friday. A painful message to anyone who tries to step in front of a high speed train. Which is exactly the feeling that the permabears had yesterday. This is the same message that applies to those who try to pick a bottom during a downtrend. Don't try to be a hero - if the trend is up, find stocks that are going up and go long. I mean, it's so simple, even a caveman can do it ;-)
My countertrend trades are usually limited to very short time frames and the risk is managed very closely. I will usually bail out of a countertrend trade if I feel it is not moving in my direction. But when the path of least resistance is in a certain direction (up or down) - I just follow the trend. That's where the money is. I don't try to be a hero and catch the top or bottom - I usually leave that to two kinds of people: 1) those who are MUCH smarter than me and understand Macroeconomic conditions so well that they 'just know' when the top or bottom is in, and 2) gamblers.
The action last week was very encouraging. The previous week the $SPY closed with a doji, and last week, we closed higher on higher volume. The weekly chart shows we still have some room before we reach significant resistance around the 200MA around 120. The daily shows we are comfortably above the 200MA, but I have posted some resistance zones on the daily chart.
What I would like to see happen is some consolidation/pullback to digest these gains and NOT go into earning season overbought. But of course, the market will decide what to do and it is our job to keep studying and adapting to price action.
I will make another post on this blog with my recommendations for some long entries.
Have a great weekend.
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