7am EST The rally yesterday felt really good on the surface. We broke through some resistance in the S&P. Financials rallied. Tech was strong. Overall, it felt like a good day. I am still skeptical about yesterday's rally. The volume was light. The reasons for the strong rally were not structural. We rallied on good earnings news from Lowes and a successful election in India. While good earnings from a home retailer means good things for the housing market, it doesn't mean things are wonderful yet. I think the Lowes earnings numbers are certainly constructive. I just remain skeptical of such a strong bounce back as well as strong futures this morning.
While we are certainly in a longer term bull market, there are corrections in all bull markets. There are still times you can lose money. You still need to be nimble. The government has been moving the economy to a government-controlled socialist system as quickly as they can. With that happening, the Obama administration can change the rules in a heartbeat. When the rules change, a trader almost always loses money.
Here is a trade to watch today. I am looking at going long Morgan Stanley (MS). Right here, the stock is in a technical no-man's-land. It needs to be watched, however. The stock is well above the 200 day moving average as well as the 50 day. It had a strong day yesterday. The risk is significant with support in the $24-23.50 range. However this is one of the strongest financials out there.
I think a break above the $29-29.20 on strong volume is your buy point. There is very little resistance until the $34 range. While the risk reward is technically about 1:1, I think the realistic downside is minimal and this will be a strong stock for the future. Stay skeptical in this market and until next time, stay low risk..
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2 comments:
Chris
Love the Blog. I read every day. Thanks for all the trades! What are your thoughts on gold? (GLD) Thanks for all you do..
Thanks for the comment. Here is my thought on gold. I think it HAS to go higher based on the fundamentals of the overall economy. That said, I think there is some trading that has to be done before we go dramatically higher. If you are a long term holder, buying the GLD and selling calls against it while you wait for the big move is a pretty good idea.
If you want the trade, you have to see the GLD solidly above $100 before jumping in. There is quite a bit of resistance there. Above $100 and we are off to the races.
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