Positive Signs But Be Patient

• Posted by Joe Fahmy
• on February 17th, 2010

I find it constructive that many stocks recently mentioned in this blog have performed well over the past few days. Examples include: $NETL $DNDN $ISRG $CAGC $GMCR $NFLX $BEXP. Assuming that you lightened up in mid-January and raised some cash, I still don't believe you should jump back into this market with both feet.

After pullbacks, I prefer to get back into the market slowly when signs of strength start to appear. The main reason is to protect the downside and to protect your confidence in case the rally attempt fails. For example, last week I took light positions in 3-4 stocks to see how they would perform and so far, so good.

The key now is to observe if a few things happen:

1) The stocks that recently broke out hold their gains (watch this over the next few days).

2) Volume accumulation comes back into the market showing participation from the large institutions (so far, the past 7-day uptrend has not shown the strong volume I would like to see, but it's still too early to make any solid conclusions).

3) If more stocks continue to build bases and "setup" technically (this could take 2-4 weeks).

My conclusion is that: so far the signs are encouraging, but you should still show patience and give the market time to prove itself. The point of taking light positions is that in case the market fails, you can get out with a small loss. If the market continues to improve, you can add to your position size or increase the number of stocks you own.

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Tickers: BEXP, CAGC, DNDN, GMCR, ISRG, NETL, NFLX

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