Now that my seemingly weekly obligatory financial media rant is out of the way let's take a look at some price charts! What really matters...
Overall I would say this market passes the test with flying colors as to the current trend. Every offensive sector sans Financials (although like we said its not quite dog-meat just yet either) are in uptrends, relative outperformers and making new highs. While simultaneously the defensive (safety) groups are ALL showing downtrend/weakened action and suggest a high investor appetite for risk assets. To me this means we still stick with the trends and ignore the fear invoking news out there. Follow price and we will be on the correct side of the market every time.
**Something to note going forward, I have been toying with the idea of instituting a partial profit taking option on trades where we have a chart pattern target acquisition and/or approaching significant overhead resistance levels. Currently with my personal accounts I have a particular exhaustion reading that I follow to determine a profit taking place with a stock that is moving very fast and exceeding standard parameters for risk management. Recently as well I discussed our holding in Ford where we had a target acquisition on the Double Bottom pattern we had been watching. I said that it would likely struggle at these levels to push higher and could see some choppy trading. Well, we certainly have seen that type of trading for the last couple months in F and its all occurring just under a major resistance level (which is also our new breakout level for the multi-year Inverse Head/Shoulder reversal pattern. What I am suggesting going forward is that when a stock or ETF we own moves into extreme overbought levels or acquires a key pattern price target at a major resistance zone, that we consider taking half our original position off the table. We still want to be a part of a winning position and don't want to pick the exact top, so we will continue to hold half a position should the stock just keep on moving higher regardless of a skewed risk reward setup. The plan at that point would be to look for a key support level to be tested on a pullback OR a breakout above the major resistance to add back the other half of the position. Now this is strictly a profit taking strategy and for those of you with taxable investing accounts, you may feel its not worth making the sale to avoid the capital gains tax you will incur due to the sale. I will simply present the opportunity to reduce exposure to a particular stock based on the above criteria and you can choose to hold the entire position or follow my game plan and trim half the shares.
What I don't want this to evolve into is an excuse to sell a winning position because its run too far or gotten too expensive. We can never know how far a trend could persist and you never want to exit a full position when the position is winning and not invalidating your sell signals. I don't want this to become an emotional outlet to our investing; we are not emotional investors, we observe price action and follow its cues. All I want to do with this new wrinkle is add a way to sell SOME shares into extreme strength, strength that my system and research deems unsustainable. And I want a way to reduce exposure to a stock once a major target objective has been achieved. Investing is a process and our strategy can always use a little tweaking from time to time. I would like to try this added portion and see how it goes.
Profit Taking Opportunity
PBW- clean energy