Notes for Tuesday 12/29/09

• Posted by Joe Fahmy
• on December 29th, 2009

As a swing trader, I find it very important to analyze the volume and price action of leading stocks and of the market on a daily basis. Why? Because the market is so dynamic and can change quickly. For example, sometimes I find strong trading ideas for 2 or 3 days and then...nothing, the ideas dry up. Overall, I am still bullish and feel the market is heading higher over the next 3-6 weeks. Short-term, I wouldn't be surprised if we have a pullback for the following reasons:

1) The ideas are drying up. While going over my stocks screens Monday night, I found very few quality trading setups.

2) I was a net-seller over the past few days. This ties into point #1. Maybe the reason for the lack of trading ideas is that most of them happened over the past few days and now they need to back and fill (which is part of normal price action). For example, I took some profits Monday in $GMCR $AAPL $GOOG $CERN $GPRE and $MELI. All of these are great stocks that I feel will go higher, but they are short-term extended and probably need a breather.

3) The NASDAQ Composite seems a little short-term extended technically.

4) As I mentioned over the weekend, I CANNOT STRESS THE IMPORTANCE OF LOW-RISK ENTRY POINTS! My priority when entering a stock is to try and be at a profit immediately. I don't feel this will happen if I initiate positions in some of these stocks now.

5) As a trader, I have suggested over the past few months to take profits into strength and look to buy these quality stocks on pullbacks to logical support areas such as their 20-day or 10-week moving averages. That's all I'm doing.

You may ask yourself: "If you feel the market is heading higher, why take profits now?" As I mentioned in my Introduction blog post, you need to define yourself as a trader or an investor...and I am a trader. If you are a longer-term investor with decent entry points on your stocks, you have to sit patiently and deal with corrections or minor pullbacks. If you are a trader, you have to deal with taking profits and possibly watching your stocks go higher. Whatever you choose, define yourself, deal with the pros and cons, and have confidence in what you are doing!

Right now, I took some profits and I will wait patiently to re-enter some positions if they pullback orderly. I will also continue to monitor the daily volume and price action as the market can change quickly.

Follow me on Twitter @jfahmy

Tickers: AAPL, CERN, GMCR, GOOG, GPRE, MELI

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