Yesterday’s sell off has been a long time coming, and we embrace it wholeheartedly. This is a market that has been moving up on fumes for the past five to six weeks. Volume has been poor on the up days and, for those who have followed us, you know that we have been complaining about the quiet distribution taking place just below the surface.
It’s been miserable finding good stocks to trade during this episode, as most stock set ups have been poor and have just not performed well. Long trades were just not working in that environment. On the other hand, the alternative to being long was just not an option. Shorting stocks over the past month has only led to pain for those who prematurely called a top. This market has been great at running up and triggering stops and the running out of gas before gaining further momentum.
But that was then and this is now. Now the market has finally begun a larger, and much, much needed we might add, correction. We should now begin a new phase in which the market should cycle lower for the next few weeks. This offers a huge amount of opportunity for those who don’t fight the trend. Embrace the downtrend and short the bounces for now. And when this has played itself out, we should see a much more stable base from which to buy stocks again, offering us plenty of great opportunity to make money on the long side again as well.
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