Markets have been on a tear for seven straight week.......
Reasons are MANY for this newly found optimism in markets......
-Economy is in the trough stage...
-Housing seeing hopeful signs....
-Banking system is on the mend.....
- Credit is flowing....
-World leaders are unanimous on many solutions.....
-IMF taking an aggressive role to help developing/struggling countries.....
-China economy is back on track of GROWTH......
So...... if the above is TRUE !!!!
How HIGH can we go in this RUNUP........?????
OPTIMISTIC numbers thrown around are very HIGH from current levels......
BUT.....
Are they realistic???
SO......
What IS a REALISTIC level for each major indices.......
Here is some potential MAJOR resistance areas :
Dow 8650(realistic).....HIGH prediction 9147
S&P 500 935(realistic)..HIGH prediction 973
Nasdaq 1970(realistic)...HGH prediction 2150
RSI numbers are also getting interesting...they ARE trending UP :
Dow 57.42
S&P 500 59.35
Nasdaq 63.53
As we CAN clearly see that Nasdaq "is the mother of all indices" wants to go higher the-most....
As we get closer to REALISTIC numbers....we WILL be in overbought territory.....
Also MAY will come to greet us & traders are generally "nervous about sell in May & go AWAY"
I will be trimming my positions @ those realistic set of numbers & will focus on Daytrading only with max 3 positions......
Also what I have done already...that in the month of April I have taken out PROFIT money completely from my brokerage account into money market..so I do NOT lose my profit..here is the example of how & when :
April 3 ...21% of profit money
April 17..10.04% of profit money
April 23..53.2% of profit money
April 24..15.76% of profit money
So.....I am trading with my principal amount only....Ideally I would like to trade with 60% of principal....but..as usual it gets very tempting to PLOUGH every available funds back into market.....
As the markets goes HIGHER...I am committed to trading with less of principal amount..like 40% only.....
That IS just my strategy for my OWN comfort level......
As you KNOW that none of us was able to predict this horrendous SLUMP in the markets...so it IS safe to predict that none of us will be correct in predicting HIGHS of the markets either.....
So .....we all have to figure out a strategy which has very HIGH comfort level for each one of us....
For long term investors ..it COULD be 100 % of investible amount & dollar cost averaging for next 10 years......
For traders.....whatever amount makes sense to you & have high comfort level !!!!
As of Friday's close..I have the following stocks in my portfolio :
CTX..homebuilder
EGLE..Bulk Dry shipper
IPI..Potash producer
MRVL..RIMM,AAPL,PC component supplier
NVDA..Graphics & chipset
PALM..Smartphone
WEN..Fast food Restaurant
It IS highly recommended that you do a comparative analysis of where the "velocity of money is better served"for that RSI is a very good guide....
OPTIMIZATION of your investible $ is extremely CRITICAL as some stocks are OVERBOUGHT & some are SEVERELY UNDERVALUED.....
Also KNOW that some sectors are currently "out of favour"...
And some stocks in any sector are overvalued & money IS flowing out .......
So....
Invest your money wisely with 70% FA & 30% TA......
It PAYS to KNOW the story behind each stock as it is NOW and how it will be in future.....
It IS always about MARGINS......
Good luck with your OWN homework & comfort level......
Next seven weeks.....markets MAY be more challenging than LAST seven weeks as many good news IS getting priced IN......
BLOG does NOT give buy or sell.
Saleem
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