MARKET COMMENTARY (7-17-09)

A lot of people asked me how I caught the moves in HGSI and DRL yesterday. In case you are new, everything's been documented in the previous post's comments section as well as on my twitter. HGSI required a 1.5 month time frame to make the decision to buy right at the open. DRL, however, required only the previous day.


I bought HGSI at $2.84 and DRL at $2.219. I sold half of HGSI at $3.52, sold a quarter at $3.83, and I am currently keeping the remaining quarter. I sold half of DRL at $2.65, sold a quarter at $2.49/$2.50, and I am keeping the remaining quarter. This is typically how I scale out of positions as they run higher. Potential tops are determined at previous resistance areas on the daily chart.


Within 15 minutes, I recouped my entire CIT loss. I told you that I would go back in the green, didn't I? I didn't think it would be this quick. You can see the upper sym tri resistance on the 1.5 month chart of HGSI and how the open would have gapped completely above it. You can also see the high-and-tight flag on DRL the day before yesterday, the most reliable short-term long pattern in existence.

So, that's how I did it. There are dozens of patterns that I look for that gap at precisely the right location at the right time. It's all about grabbing your balls and executing the trade immediately at the open. There is no room for "thinking about it" as you are gauranteed to miss the initial move. As long as the setup is high probability, it's a risk worth taking.

In the end, CIT failed to do damage to my portfolio. The more you don't care, the more you are able to focus on making things right. I had no choice but to be more aggressive yesterday to quickly take advantage of these gains and contain the damage. Folks, I do this nearly every single day. It's nothing new.

Imagine if you could bag a +20-30% gainer almost every single day? Welcome to my life.

Anyway, I'm thinking that the SPX pulls back to the 50-day support over the next few days. A breakout of the multi-month high would be an enormous victory for the bulls. It will confirm the possible continuation gap that was formed on Wednesday.



If you look at the COMP, you can see that the index actually made a new multi-month high. The pattern is extremely bullish on the daily. We can see a descending bear pennant and NOT a head and shoulders.