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July 22, 2012 / redman59

Gears Reset with Stocks I’m Looking to Buy

After being on vacation for the last week, my mind was unwound by the scene and nature of the NC mountains and the gears in my head are reset and ready to get back to the market. Before going on vacation I wrote here on June 7th:

“Also I am looking at that 1333-1337 as a tough level to crack. If I were to initiate longs under this level they will be small…In reading several blog posts it seems that further consolidation would be the healthiest and I agree. I would like to consolidate below those resistance levels noted, let accumulation happen, and then rip to the upside through those resistance levels…”

The scenario that I wanted is starting to play out and stocks consolidated last week and now we breached some levels I was watching with a nice move starting Thursday to today. I believe stocks are digesting quite nicely here and now is the time I will look for stocks displaying relative strength in this current environment.

My plan here is to run scans from now through the week on stocks that have been strong but are not extended. Reason being is if we see more selling my thoughts are that the stocks that broke out will see more selling than those that are strong but still within bases. Stocks that come to mind right now include: AAPL, ADI, AMZN, CMG, EAT, & V.

My trade record shows better performance for me on stocks that pullback after a breakout, so that is what I am looking for. For these I will be looking at the hourly chart for entry on pullback because I think watching a daily chart will take too long and I may miss the upside (if any) move if stocks ramp higher.

Other than those stocks listed above, I don’t plan on initiating swing positions in anything else until after Wednesday when Bernanke speaks and the FOMC announcement is made. I am bullish on the market here and right now I am looking for a pullback to get in.

One note is that the VIX did close today below the lower 20 day Bollinger Band which historically has shown to create stalling or some selling in the SPX, allowing you to get in. Also we are nearly 80 points off the low so a pullback is warranted. With that I do believe there will be time to get in trades but I am looking to get some exposure here in case it becomes one of those rallies like the beginning of the year where the down days were few and far.

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