| 44-26-9 (or… Trading with Pullbacks and Corrections) |
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| November 27, 2007 |
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What is…a locker combination? The next winning lottery numbers? Barbie’s™ measurements?
Hmm—all very possible (especially the last one) but the correct answer lies in your ability to spot the difference between a market correction and a market pullback. There are different trading rules to follow depending on which of the two the market is in.
Think about the most recent supposed “corrections” this year:
44 days: the duration of the correction back in January of 2007.
26 days: the duration of the correction in July of 2007.
9 days: the duration of the pullback we just experienced earlier this month. (AND 90% of the decline took place in just 5 days!)
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The Only SOX You Need This Fall
The Semiconductor Index (SOX) tracks 18 companies that design, distribute, make, and sell semiconductors—what we call “chips”—including Intel (INTC), National Semiconductor (NSM), and Advanced Micro Devices (AMD). It was created in 1993 by the Philadelphia Stock Exchange with an initial value of 200, or an adjusted value of 100 based on a 2-for-1 split in 1995. It high its all-time high of around 1300 in 2000, then tumbled 80% before turning around in 2002 and topping out in the 500s over the past few years.
Now, with the SOX having fallen recently to around 400 and a lot of technicians saying it was in a head and shoulders pattern, you might think I’m crazy. But what we’re really seeing is bullish divergence. That means our target is up—way up. So pin the SOX chart over your fireplace and get my next batch of buy alerts delivered right to your inbox.
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Surprisingly not too many people can accurately identify the one that “doesn’t belong.” It seems easy enough when you break it down in the charts but then not everyone knows how to interpret the charts to their benefit. Ain’t it grand that I can? (And then I can tell you!)
You see the latest decline was too rapid to be like the others. Sure, we’re still hitting some friction right now but from my vantage point, the market is not destined to go lower.
Now some traders will make mistakes in the coming days and weeks simply because they are confusing the current pullback for a correction. That mix-up could cost them dearly!
As I see it, there are three possible choices a trader can make in this current market:
- Traders can secure a position for themselves in preparation for a massive leg-up.
- Traders can short stocks like mad in an attempt to benefit from the “correction.”
- Traders can flee the market completely based on fears over a continued decline.
Your thinking should be in line with #1 — if not, you might want to brush up on your market savvy (I’ve got plenty of lessons to show you how.)
The only direction I see us going from here is vertical—UP to be precise. So please, don’t get sucked into the short side and don’t leave the market with your tail between your legs either. This is the time to be solid and confident.
I’ve got a slew of new buys coming around the pike—some will be alerted to later this week. We, at Trending123, are going to be out in front scooping up the best profits this soon-to-be-rally has to offer. Join us now to be the first to know!
There’s not a lot to act on at the moment. Now is the time for keeping a watchful eye on the market and the charts. Once there is increased movement on the upswing, you should be ready to pounce at a moment’s notice. So stay tuned to Trending123 for updates!
Sincerely,
John Lansing
Trending123
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