Tuesday, April 17, 2007

Ready for Some Answers

Volume finally picked up as price printed a doji, which is another way of saying that today was all about tomorrow.

Today was also about US tax deadlines, but that's another story.

A 5-week rally on declining volume isn't my favorite and raises all sorts of questions. Fortunately, investors will likely start getting some answers tomorrow. Today's candle pattern -- and tonight's Yahoo earnings miss -- essentially guarantees an opening selloff. It's the selloff that begins answering the questions.

Everyone plays these moments differently. Personally, I watch for price/volume divergences. If a stock falls hard on light volume, I may hold. However, if it falls and volume is heavy, I dump with extreme prejudice. But that's just me, and everyone's gotta do their own thing.

If tomorrow IS a volatile day, the best part is that you get to peek at everyone else's hand. Beta soars and bluffs get called left and right. Selloffs are great because they famously expose both the weak AND the strong ideas.

They're also a process, and are rarely over in a day. Think about that when your stock starts going right back up after you sell it. Or maybe that only happens to me.

Recent stock action, market internals, the IBD100, economic data and earnings strength suggest that we'll see a healthy shakeout, but will be spared financial Armageddon. However, those odds have about a 40% margin for error, so be careful. It's OE week and May is right around the corner.

Today was a living commercial for me: New wireless router, $179. Wine and a nice dinner with the family, $86. Cutting a big, fat tax check the day before a selloff.


Until tomorrow, have a great evening.



In the take-a-picture-it-may-last-longer department, I'm sticking this here tonight for posterity (just kidding). Seriously, as I mentioned on Monday, the low volume favors the gap below getting filled. That's 2491. Should things progress, the 13-day (dotted line) is the next target, which on Wednesday will be about 2478. If you're a Fib fan, the 50-day is your first target (62%).

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