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Jeff Pierce
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I’m a swing trader of momentum stocks with a holding period of anywhere from a few hours to a few months. I run a number of screens to locate the strongest/weakest stocks out there, using technical analysis to determine my entries and exits. Trying to calculate the intrinsic value of stocks in... More
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  • Rare Pattern On Nasdaq Appears 0 comments
    May 21, 2013 1:40 AM

    By Harlan Pyan

    The following is an excerpt from the weekend premium market report by All About Trends. Enjoy a free 15 day trial to their service to get daily stock picks, market analysis, and a complete trading plan.

    "While we all know the indexes are severely overbought in all time frames and frequencies the last 4 days has been more of back and forth with no real progress."

    And then came the famous "Into The Close " Pump that blew the whole sideways consolidation out the door with the break into a new high again. IBM had a lot to do with that as it was up pretty big on the day and makes up 17% of the Dow. That's in the short term. What about the bigger picture?

    Last week one of our subscribers said:

    "DOW & S&P are also in new territory. We've never been here. No map. No idea how high we can go. No technical guidance."

    Yes, right he is however. Technically speaking under the surface from a chartists point of view we actually do have a pattern to work off of. Albeit rare as they only show up at the end of major runs in the markets and that means major runs to the downside and major runs to the upside and they are called a few different things. Namely climax runs or blow off tops.

    Let's take a look at a chart from the past to see if there are any similarities to the current run.

    (click to enlarge)

    (click to enlarge)

    Think about it this way. We all know most airplanes have what are called ceilings. That's the point at which a jet engine gets starved of oxygen due to too high of altitude. Ever hear of the phrase "thin air up there"? Same deal. At some point (sooner rather than later) the air is going to get real thin up here. We've seen it before and we'll see it again. A point in time will come where the market sells off and in doing so wipes out WEEKS worth of gains in short order.

    Good we say as it allows for actually being able to buy names that have came down to lower risk entry points ala support or has everyone forgot that word these days. So don't be fooled into complacency here that the market is never going down just because it hasn't yet. We at this point are going to let cooler heads prevail at this point and BE EXTREMELY SELECTIVE WITH A REALLY SHORT TERM LEASH on anything new on the long side.

    Sure when one looks at the headlines it's looking pretty easy to make headway. BUT try putting NEW money to work. The extended stay extended and that's where the drive is, all the extended names with ZERO LOW RISK ENTRY POINTS TO BE HAD.

    Related Posts:

    Correction: Sideways Or Pullback?

    Three Breakouts To Watch

    Pause Would Do Markets Good

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