Trading Plan for May 2, 2011
Current Long Positions (stop-losses in parentheses): GOOG (524.00), NFLX June 270 Calls, DF (10.48), NVDA (18.73), BKI (26.35), ADM (35.58)
Current Short Positions (stop-losses in parentheses): None
BIAS: 44% Long
Economic Reports Due Out (Times are EST): ISM Manufacturing Index (10am), Construction Spending (10am)
My Observations and What to Expect:
Futures are moderately higher heading into the open on news of Usama Bin Laden's death (Go-USA!)
Mixed markets in Asia, but on average, were moderately higher, and Europe is seeing green across the board ranging from 0.1% to 0.7%.
S&P looking at opening outside of its upper bollinger band with the death of UBL. A strong rally today, will lead me to trim my positions across the board, because we are very much due for a few days of profit taking.
We haven't been this overbought since Nov. 2010, which ultimately led to a hefty sell-off. I don't expect a significant sell-off, but at least a short period of cooling.
One interesting note, since the March 2009 recovery lows, and the ensuing rally since then, volume continues to get lighter and lighter on the monthly chart, as prices march higher and higher.
When I begin to see the S&P push as high and as fast as it has, it helps to take gains, where the easy money has been made and limited upside remains, and then use that capital for new plays.
And if the market happens to pullback or see some slight selling in the process, you A) are less exposed to the selling and B) you get to trade new positions at a better/more advantageous entry.
Some minor resistance may be found at 1370, but the more significant level is at 1430 .
By breaking 1340, we confirmed the inverse head and shoulders that had been in development since February '11. Last time we confirmed a IH&S pattern was back in Sept '10 and we rallied 220 points after the confirmation.
On the 30min intraday charts, watch the 1350 level for support. Strong trendline in place off of the 4/18 lows. A move below 1358 would break this level.
Higher-low has been established at 1294.
My conclusion: Rally off of UBL's death, will provide a good opportunity to book gains off of this recent rally.
Here Are The Actions I Will Be Taking.