Saturday, February 5, 2011



except for Monday's small win, I did not accomplish my goal despite many opportunities.  I had candidates lined up each day.  High volume story stocks like  RAX, SFLY, CRUS  --- these are the kind of hot stocks that are safe to trade intraday since you can easily risk $100 to make $300 - $500 on each trade.  These trades are actually quite safe -- the strong volume is the wave of power that keeps them moving up on each breakout. 

They appear unstable -- and they will be -- but for the day, the only way to make money is to go with the trend when the volume is there.   Instead, I dabbled in TZA and gave away profits.  I shunned strong stocks.

This market is currently in a bubble.  The hot stocks are very very hot.  The rest are not.  Money keeps searching for a home and cash is not king.  I am probably early in being short with TZA.  I knew the first week of the month would be strong -- it always is.

The negatives are creeping up but not there yet -- the volume is light.  A few leaders are really broken like AMZN.  OIH is overextended.  The dollar has woken up.  Nonetheless, there is hot money pouring into tech, software and chips in particular.  Valuations are beside the point.  QQQQs hit a new high but AAPL peaked in mid-January.  The light volume is the issue -- all good waves require power and without more power, the danger of a fast and sudden pullback increases dramatically. 

My plan now is to remain heavily in cash and trade power stocks intraday.  I get the sense most people are happy to be long -- fear is gone... and there's plenty of stocks to play.  But I remain cautious until we see more participation from the market.  Breadth is bad which is another warning sign.  But waiting for a correction is futile.  However, I think the dangers of a pullback now have increased greatly so I will not hold positions either. 

Next week - I want to again attempt to make more money daytrading. This means:

having a short list of hot stocks that are moving with heavy volume.  Buying these stocks on trendline breaks - just like on a daily chart.  Key is:

1) Story stock in strong sector
2) tight float
4) expensive price -- will seem ridiculous in value
5) up day in market.

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