Market Analysis and Trading Plan, March 8.

An Excerpt from the Timely Trades Letter.
During the market move last week we saw nice moves in many of our setups from last weekend’s Letter. PCLN moved up sixteen dollars, CMG was up five dollars, NEWP moved up 4.5%, OIIM up 4.8%, PIR up 6.7%, CPO up 3.7%, JLL up 3.8%, CMI up 5% and LZB up 13%. We also saw new moves in the setups from the mid week Letter including AF, EQR, TCO, MYL, BEBE, and CVG.
Now that the market has reached the horizontal resistance area from the January highs the trading plan is fairly straight foreword. The normal actions for the market when reaching horizontal resistance are to either break above resistance, base for a bit just under resistance, or retrace. The latter two scenarios occur more often that just breaking through resistance on the first try; but experienced traders have a plan for either outcome, and just trade the plan.
If the market sets up a tight base just under horizontal resistance I will stand aside while the market rests, and then trade in the direction of the break out of the base when it comes. If the market breaks above horizontal resistance, I will add new long trading positions. On a small volume break above horizontal resistance I will pick up a few ‘feeler positions’. The price pattern tells me which way to trade, and the volume pattern tells me how aggressive to be. Light volume indicates light interest in a move so I trade lightly. If the market breaks above horizontal resistance on strong volume I will take more long positions. If instead of breaking above resistance, the market pulls back, I will close most remaining long positions. If the pullback comes on clearly above average volume I will pick up a couple of short positions. A light volume pullback is best left alone until it finds support and bounces.
There are no risk free trades. I want to manage risk by looking at each setup and asking, ‘what is the lowest risk way to enter this trade?’ I then want to compare that risk to what my other choices are. I am not focused on one stock, I am looking to manage units of risk by looking at all available trades, the various entry techniques, and the potential risk to reward that each trade yields. I then take the best of what is available, within the constraints of the trading plan. I do not focus on watching for triggers to within the penny. I am looking at all the potential trades and then picking the ones that are best. All trading involves risk, there are no sure bets.

Steve Palmquist a full time trader who invests his own money in the market every day. He has shared trading techniques and systems at seminars across the country; presented at the Traders Expo, and published articles in Stocks & Commodities, Traders-Journal, The Opening Bell, and Working Money. Steve is the author of, “Money-Making Candlestick Patterns, Backtested for Proven Results’, in which he shares backtesting research on popular candlestick patterns and shows what actually works, and what does not. Steve is the publisher of the, ‘Timely Trades Letter’ in which he shares his market analysis and specific trading setups for stocks and ETFs. To receive a sample of the ‘Timely Trades Letter’ send an email to Steve’s provides additional trading information and market adaptive trading techniques. Steve teaches a weekly web seminar on specific trading techniques and market analysis through Power Trader Tools.

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