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In this quick "trading tips" article, I'll share a few specific tactics that should be very useful for your trading in the current markets:

Market Snapshot: We've been on a tremendous rally this past few weeks in the markets, with both breadth and depth within/between sectors and strong technicals. Just take a look at the recent action:



Note that this has been a great 25-day run in the COMPQ, and so now is a great time to start taking partial profits by trailing close stops and exiting 1/3 positions for opens, because as we know, the market will not continue to rally forever. The question is how to profit from this recent move, and enter/exit successfully in the weeks ahead.

TIP #1: For Position traders
a) for Position traders, note that it's a common mistake for traders who've initiated position trades to close "underwater" trades out when they get back to breakeven, after being in the red for awhile. This is usually the exact *wrong* thing to do, because when it comes back it's often the right side of a bullish cup that continues on up strongly.

At a minimum, I prefer to close small partial positions (eg 1/3), and trail a close 1 1/2 - 2 point stop on remaining open longs, instead of closing out the entire position. Note that the most likely pattern we'll see coming up is a consolidation ("handle") of the right side of a bull cup market, not a strong continuation or reversal, in the immediate days ahead. Great time to book small partial profits, and trail close stops on remaining open longs.

Take a look at the 1-year NASDAQ composite, see how we're NOW approaching prior resistance? Other traders see this too:




See the difference, when you put it into perspective? Looks great on the top chart, but looks like nearing prior resistance on the 1-year. Keeping multiple timeframes in front of you is critical to success as a trader.

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TIP #2: For us Daytraders
This is a great time to be DAYTRADING more aggressively, as we'll see lots of volatility on intraday swings near prior major market resistance. Remember to scan for stocks with prior day's ranges of 2 points or better, and clean, wide trading lines on high volume (plus gap stocks).

TIP #3: For Swing traders
This is a time to be CAUTIOUS on swing trading, because it's more likely we'll see overhead resistance here, so I am not initiating any new swing trades in this current market, til we clear major resistance levels as noted in the graphs above. As we get near major resistance, we'll see more volatility and more retracements, selling into strength, and profit-taking, so it's not a good time to be initiating new swing trading positions, until we clear those resistance area hurdles (most notably the 1700 in the COMPQ).

Hope that helps, traders -- keep your powder dry and the profits coming!

To success,

Ken Calhoun


Register for your FREE Webinar Tuesday April 21 at http://www.TradingTheOpen.com

Reminder - feel free to register and post questions, I'll answer them. Don't post more than once, I manually have to review/approve/moderate all posts, so give it a day or so before it will appear. Remember the forum will send an activation email to you, many times these end up in spam/trash folders (esp. from aol/earthlink/spamarrest/comcast), so check those, and re-register with a 2nd email address if needed. You must click the link in the forum's activation email to be put in the queue for approval to post.

thx,

Ken