Exposing Ideas to the Envelope of Serendipity

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Thursday, March 11, 2010

Bullish Breakouts and Set-ups Still Abound

Yes, we're technically overbought on a short-term basis, but that doesn't hide the fact that there are bullish breakouts and buy signals are popping up all over the place. Markets can remain both overbought and oversold for a long time, and sometimes the much-anticipated corrections or pullbacks take the form of sideways consolidation, which can also work off extended conditions. Certainly, some stocks are clearly in need of a rest and have accordingly pulled back in the past day or two, but others have quickly stepped up to take their place, and the positive stock and sector action taking place has been quite broad-based. Financials have been of particular interest in recent days, and as I have mentioned recently, buy signals were generated in C, $BKX, and AIG. I am also continuing to closely monitor the action in the dollar and began lightly scaling into precious metals with tight stops a couple of days ago; but early signs of a possible move back up remain tentative until a little more progress is made. The dollar is still looking vulnerable to more of a pullback near-term with the potential head and shoulders pattern shown yesterday still "in play" but not yet confirmed. No one can ignore or deny the persistence the dollar bulls have demonstrated over the past couple of months, and any pullback there may be short lived; we shall see.

As long as we remain in technically "overbought" territory, common sense dictates that some profits be taken in stocks that have already seen a big move and are showing signs of fatigue. And in those situations there should be some good short-term plays on the short side. But until proven otherwise, we remain in a "buy the dips" trading environment and pullbacks or consolidation in stocks with sound bases and bullish patterns should present attractive buying opportunities.

Trade well.

-- Brinkley

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