Trade Plan For Wednesday(China Interest Rates, BAC, AAPL the US Dollar and Commodity Weakness)
Posted on October 19, 2010 by trader21 in GLOBAL CHART ANALYSIS
The extreme weakness we have recently seen in the US dollar over the past few months, has led to higher commodity prices which then led to higher prices for those underlying commodity driven stocks. On Tuesday we saw the biggest rally in the dollar since June so the expected happened. We saw a mad rush in profit taking in those commodity related stock names and ETF’s
The surprise credit tightening by China also helped force money to the sidelines in those names depending on the BRIC countries for growth. These too included the commodity names.
So between a wildly overbought market, the ugly tech earnings last night from Apple and IBM, the BAC news and the surprise China move to raise interest rates, it is no surprise we saw across the board selling.
We have had such a large run off the August lows with very minimal pullbacks so we could see a a move lower by as much as another 3-4%. This being understood prepare accordingly. Overall we see this as nothing more than a normal pullback but make sure you have enough profits to ride it out. We have already taken profits on most of our positions and have a nice profit cushion on the remaining portion.
For those newer positions, we have good field position on our entries but we will keep them on a tight leash so losses stay small if this pullback accelerates.
This was our 4th heavy volume selloff day this month so we definitely could see some more follow through to the downside before we bounce. We are not willing to step in front of an overbought market in profit taking mode so we are holding off on new long setups.
We are not willing to set in play any short setups in this market either since we have no reason to believe this market is in anything more than a pullback in a strong uptrend
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