Trading High Potential Stocks

Still Patiently Waiting For Good Entries

by OLIVIER on JULY 18, 2011

Two weeks ago the market looked like it would provide excellent entries soon. The last few days simply don’t look good. Something doesn’t feel right. When I say ’something doesn’t feel right’ it usually means the following:

What can I say. A very important rule is to accept the hand you are dealt. Trading one’s opinion and‘trading against the charts’ is not going to yield positive results. So the ‘waiting game goes on‘ as I once posted.

The most worrisome aspect in my opinion is the weak banking sector. Some traders don’t view this as being such an important factor. Their reasoning goes somewhat like this: “The market so far was able to move up nonetheless. ‘Bad news’ is a non-issue.” True, but I somehow disagree. One of the market truisms I learned years ago and that is now deeply engrained is the following: Big players and value investors wait for revolutions to hit developing countries. They literally wait for dictators to get removed, the parliament to go up in flames and for the famous ‘blood in the streets’. What most people have heard about in this context is ‘buy when there’s blood in the streets‘. As a matter of fact in these situations the big buyers typically buy the stocks of the three biggest banks of the country. The reasoning is simple. If the economy is going to do well, banks will profit.

• Financials – Sector Overview Chart

Conclusion: To make a long story short, when banks are in trouble it is not the time to play offense. Technically speaking we could still move higher though as lots of today’s candles look like reversal candles. Still, I see lots of indecision when it comes to the market’s message. We will most likely get lots of clues as what to expect next before the week is over.

Gold is acting very well, the miners are starting to outperform the metal. Something we haven’t witnessed in quite a while. Got to keep an eye on this new development. I will write more about this topic soon.

• Gold – Daily Chart

Those who sacrifice liberty for security deserve neither. – Benjamin Franklin

My public list with all my charts can be viewed here:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2791469

Buenas noches!