A largely sideways 4-day week puts the market on alert for bullish breakouts.
But … and it’s a big But … You will have to trade these with great care and protect your trades fast.
How?
First, only set a very modest first profit target after any breakout.
Second, raise stops quickly after you’re in profit.
The consequences of this are that you may well get stopped out quickly for a scratch trade, but that’s better than a potential severe retracement against you.
This week, it’s again the energy sector that has been the most robust.
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Current Market Behavior:
Last week was a consolidation week following a sharp upward bounce the week before.
While the averages remain below the 50- and 200-day Key Levels we’re not out of the bearish woods, but markets have to recover from somewhere, so we have to be open-minded and only Trade What We See.
Right now, what we see is a large number of consolidations, many of which are bullish in nature – either with upward flagpoles and/or with positive OVI readings.
On top of that, very few stocks have crossed down through their Key Levels over the past 6-weeks, though many are simply so low they’re simply remaining below those levels.
The longer term slower market timer – my OVIsi – is still in the Amber zone, meaning caution.
My medium term SPY Swing Timer is now positive but not overbought. The SPY OVI has stabilized around the zero level and is therefore not giving us a compelling insight this week.
The short term indicator has added two more green arrows since last week.
As always, please do not simply follow the arrow signals blindly. Regular short term signals are prone to “noise”. This indicator is best used on conjunction with other signals, namely the Medium Term Swing Timer, the SPY OVI, and price behavior around Key Levels.
All the indices still remain below their 50- and 200-dmas but look poised for a breakout. The question remains, what kind of breakout.
Market Outlook:
On balance, short term we’re looking to follow up from last week’s consolidation with upward breakouts.
Stock Selection:
Most pickings were bullish this week, and if you follow my Twitter account @GuyKCohen you’ll see that I posted an image of a filter I adapted from my basic Consolidations (#36) Fast Filter.
Application:
So, I took that Fast Filter and added a positive OVI constraint, a 50-dma upward cross constraint, and a bullish momentum initiator bar constraint.
We’ll only know with hindsight, but there are a few nuggety setups from that and a couple of other Fast Filters I used today.
You should use the Big Money Footprint Fast Filters as well.
Software Upgrades
The new “Toolkit” has been launched without any issues. If you find you can’t launch the new charts from the Toolkit, simply try clearing your cache, or updating your browser, or rebooting your computer … or all three if necessary. I’ve only had issues on one of my machines and even then, only on one of my browsers. All the others worked perfectly.
Many people are already asking about next year’s Miami dates … I should have those available in the next week or so.
This year’s Stocks Summit will be on 3rd December in London. More details to follow shortly.
Many more important upgrades to follow in late summer.
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Remember, you can play the video at 1.25x or 1.5x speed if you want to save time! I have placed all the stocks covered in today’s review in your “Latest Preview” watch list.
