Again we have a follow through day. Last Wednesday we saw increasing volume with a big jump in points on at least one of the indexes four days after a recent low was made. This wasn’t an outstanding follow day but meets the criteria so again we have to be in buy mode. Remember a follow through day leads to an uptrend about 75% of the time but can fail. The objective here is to statistically put odds in your favor.
Since nobody can guarantee a new uptrend has begun we must once again probe. I would suggest you take small positions in just one or two stocks that are breaking out to new highs on volume. If these stocks fall back you protect yourself with a 10% sell stop and wait for a stronger market. Remember if you take 10% of your investable cash and use a 10% sell stop then if you are sold out early you lose only 1% overall. If the stock starts moving up after purchase you would reduce that 10% sell stop to be even less. Once the probing investments become profitable you can take other new positions and start adding to existing positions.
Here are a few companies for you to consider and remember not to buy just before an earnings release in case of bad news.
AZO – $200.12
PANL – $19.80
MEND - $22.19
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