Like I do every day, I have prepared a set of trade ideas for today:
1. All the long ideas are buys on a pullback of stocks that broke out yesterday on strong volume. You can see that the current price for all these ideas is way higher than the calculated optimal entry price. This price is calculated using statistics of the past 300 trading days. This tells us that the market is still in a bullish mode: strong stocks are getting stronger and pushing higher.
2. Many of the overbought short ideas (those shown in Yellow) have a current price that is higher than the overbought entry price. This also indicates a market that becomes more overbought. It is very unsafe to short these stocks, because they still are in a shorts covering mode.
My conclusion is that trend following on the long side does not work because prices are too high and fading high prices does not work because momentum is still pushing stocks higher. We need to wait for better clues, such as a falling Cumulative Tick of a falling MF on a specific bullish sector for example. We could also wait for a pullback in a bullish sector and detect that money still comes in.
I also find interesting that AAPL, FB, GoOGL are under pressure. These were safe haven stocks in the previous uptrend, but high rates renders safe havens unsafe. Maybe time to short QQQ?
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