WRONG! and here is why.

$INDU

$SPX

$COMPQ

The Song Remains The Same, Or Does It?

As we are all well aware the markets continue to plow to new highs with buying the dips and selling the rips continuing to be the trend. As long as that continues, that’s the plan. However at some point that trend will change too.

But how will we know when it changes? Much like we’ve talked about a Double Top or Double Bottom being an early warning alert system to give you a clue as to an impending change in trend pattern, a rising wedge is also an ending pattern.

As we’ve been stating it’s all about buy the dips and sell the rips. This most recent rip has us up basically 8 days in a row. So where’s the dip? There isn’t one as of yet, just more of the Fear of missing it crowd AFTER they’ve already missed it.

As you can see we are still in rip mode.

$INDU

In addition, take a look at how extended some of these stocks are:

As you can see this is a gold stock, notice how extended it is? Why go chase a bus?

Same here.

Now take a look at two buying opportunities:

PWRD — Perfect World

LIFE — Life Technologies

With both PWRD and LIFE, you can see they have broken out of flat bases. So time to buy right. Well, it all comes down to risk management. If you buy these stocks here, you are buying a new highs with the full stohcastics in mega-overbought territory.

Now compare that to BX which we recently featured as a long set-up:

The difference here is we like to buy stocks that have pulled back to support with the full stohcastics in oversold territory. Notice how BX did just that. The pink line represents the pullback and the blue line respresents support which happened to also coincide with the 50-day moving average.

A break above the pink line triggered a buy on the long side. At that point, we issued a Trade Trigger email alert to our paying subscribers so they could take the trade at the most opportune time.

With PWRD and LIFE you have the opposite, issues making new highs with the full stohcastics in overbought territory. Sure, they could work out, but the chances of that and the percentage gains are smaller vs. buying a stock like we did with BX. We are all for going higher BUT we DO NOT CHASE BUSES. Instead we like to play the percentages that work the most in our favor.

To learn more and see more set-ups like BX, sign up for our free newsletter at www.allabouttrends.net.