Trading High Potential Stocks

At first sight the headline I chose looks like this might imply one should redeploy funds aggressively on the long side. Although the short term technicals have improved, from a big picture perspective the technicals are still bearish and the trend remains down. A clearly positive development is the fact the markets were able to put in a higher low and what looked to be a bearish head and shoulders pattern has now morphed into a bullish inverse head and shoulders formation.

A few observations:

• Leaders like ARUN – Aruba Networks are acting very well. Others are joining in and providing decent percentage moves to the upside.
• The stocks in the Rare Earth Elements Sector are much stronger than I would have expected. Especially RES.V – Rare Element Resources is acting well. For now it looks like the sector might be able to stage a turnaround. Looking at the charts the bearish patterns I wrote about regarding QRM.V – Quest Rare Minerals and AVL.TO – Avalon Rare Metals seem to be of much less concern now. Rare Earth Elements Sector Overview Chart.
• The market is beating my expectations and is stronger than I originally anticipated.

The last comment is the most important one. Whenever the market doesn’t meet or if it exceeds your expectations, it is time to pause and reflect. A great trader’s performance depends on his ability to adapt to a changing environment. The market is telling me to keep an open mind and to be ready to change my mind.

Again, buying pilot positions is probably the way to go. Put another way, at this point in time I would be neutral or cautiously bullish. For now my plans are to stay in cash as I am still in holiday mode and am still recharging my batteries. I will start providing regular website updates starting with the second week of September. In the meantime my focus is on other stuff so no guarantees as far as regular updates are c