Market Tone Has Changed

by Olivier on March 7, 2011

Not exactly my best day ever. Then again, as a technical trader you have to embrace pullbacks and consolidations as they will provide the fuel for new moves to the upside. That being said, we are witnessing a change in tone in the market. The aggressive momentum driving up stocks is gone for now. As far as the overall trend is concerned I still see a strong bull market and lots of signs still point to further price gains down the road. New extremely strong sectors like the Fiber Optics Sector have emerged and will most likely be the new leaders once the dust settles.

When I say ‘when the dust settles’ there is of course no guarantee this will actually turn out to be the case. But for now there is no reason to panic or to aggressively short the markets. The nature of trend change is most often characterized by gradual change. Trends do not tend to end abruptly without prior warning signs. This means we could simply slow down a bit here and trade sideways for a while. I see contained movement to the downside as opposed to stocks crashing and burning.

Conclusion: As much as days like today might hurt, for now the technicals still point towards the market pausing and setting up for further gains in the near future.

A few quick comments on my portfolio positions:

  • CNL.TO – Continental Gold: Stock is forming a big bullish ascending triangle. Stock looks very promising and I still expect the stock to start its move towards 15 – 20 CDN$ during the course of the year.
  • DNN / DML.TO – Denison Mines: The stock is in the process of building a very bullish wedge. Take a step back and check the weekly chart. The pattern will become even more obvious. Technically speaking this is the perfect set-up for another doubling in price once the bullish pattern is confirmed and the stock breaks out to the upside again. We are not there yet. But as I said a few days ago, I do expect the window of opportunity to buy without having to chase to close within the next few weeks.
  • LNG – Cheniere Energy: Stock actually didn’t act too badly on a day lots of stocks displayed a lot of selling pressure. Patience. The short squeeze set-up is still in play.
  • RGX.V – Argex Mining: I had hoped for the stock to display more strength and had expected some follow through after yesterday’s late day recovery. No such luck. This stock has incredible potential. If I’m wrong I will simply get stopped out and swallow my pride. If the stock proves itself the reward could be huge. Time will tell.
  • SOLR – GT Solar: My timing was not good. The stock is still holding up very well and displaying much more relative strength compared to the rest of the solar stocks.
  • TMB.TO – Tembec: Not much to say. Strong uptrend. Stock could end up needing more time for more consolidation. Ultimately I think it will continue to march higher.
  • UEX.TO – UEX Corp.: Conservative high quality Canadian Athabasca Basin Uranium stock. In a confirmed bull market you buy the dips. Considering I am very bullish for the Uranium sector I am not interested in selling weakness. It is still very early in the game for this new bull market. Be aggressive when others are fearful.

The best stock to buy may be the one you already own. – Peter Lynch

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

Buenas noches!

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