Closely Monitoring The Strength Of The Coming Bounce

by Olivier on May 25, 2010

Simply watching the market. The main thing to watch will be the strength of the bounce that looks imminent. Lots of sector like Steel and Coal e.g. have build topping patterns and there is a lot of uncertainty regarding Europe, Thailand, Korea and the BP – British Petroleum oil spill to name but a few. Markets hate uncertainty. Interesting times ahead…

There are still bullish charts out there but the amount of stocks about to bust out from small bases near their respective all time highs have been drastically reduced. Another way of stating the technical damage inflicted has been huge. As of yet, the path of least resistance for the medium term is clearly down. Short term there will be a bounce. As I recently stated most traders will look to short rallies. Here’s what to look for when you short a bounce.

I will closely watch for new leaders to emerge, watch how resilient stocks are, which stocks and sectors will emerge as the weakest ones and where money will flow to. Speaking of money flowing into stocks and sectors, I’ve removed TIVO – Tivo Inc. and replaced it with CSTR – Coinstar which is not only showing extraordinary strength during this recent down move but has actually printed a break-away gap and has traded up ever since. CSTR – Coinstar along with NFLX – Netflix, another strong chart, is part of the Entertainment Sector Overview chart on my public list.

For now I have no plans to jump right back into the markets. Sometimes it is best to sit on your hands, which is what I am doing right now. Also taking advantage of this opportunity to do some other stuff and recharge my batteries.

All things are only transitory. – Johann Wolfgang von Goethe

My public list with all my charts can be viewed here:

Buenas noches!

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