Be Patient When the Market Gaps Higher – Wait For the Bid To Be Tested – Then Buy

TAKE THE FREE TRIAL TODAY AND I WILL PERSONALLY GET YOU INTO A GREAT DAY TRADE Posted 9:20 AM ET - After 18 months, the market has finally been able to make a new all-time high. Stocks continued to grind higher yesterday and the price action looks positive before the open today. No one is going to stand in front of this freight train so the offers are small. Some Asset Managers are under allocated and they are playing catch-up. The bid is steady and I don't see any speed bumps this week. The Beige Book will be posted this afternoon and it will show sluggish growth. It won't have much of an impact on the market. China will post industrial production and retail sales on Friday. I am expecting in line results and the news should be market neutral. Alcoa posted better-than-expected earnings and the only other announcement worth mention is J.P. Morgan tomorrow. Banks will struggle in this low interest rate environment and the stock will do well to tread water. The major earnings announcements won't start until next week. I have been day trading from the long side 30 minutes after the open. When the market gaps higher all ships rise with the tide and it is difficult to identify relative strength. After the initial surge higher on Tuesday, the market retraced and my patience paid off. Many stocks pulled back and they never recovered. Those that wanted to move higher held firm and they popped as soon as market support was established. This is a pattern we trade every day in the chat room. One of these days the early rally will fail and there will be a nasty little reversal. If you are not patient, you will get caught in the trap and the losses will mount very quickly. I mentioned yesterday that this is a good time to scale into call positions. Option implied volatilities are low and it is a buyer’s market. I like focusing on stocks that have pulled back and that are rallying off of a base. They have plenty of upside and they don't necessarily need the market in order to move higher. Conversely, stocks that are making a new high depend on a stiff tailwind and they need help from the market. As long as this rally does not get too far ahead of itself, the dips should be brief and shallow. Look for opportunities to take some overnight long positions. My day trading has been incredibly profitable and I'm still keeping my overnight risk very low. I did hold one call position overnight, but the skeptic in me is keeping my overnight exposure small. I won't embrace this breakout until I see it hold for at least a week. Look for choppy action today with a slight upward bias. The market has moved a lot in the last week and it should take a breather. Add to call positions and day trade from the long side after the first 30 minutes when you are certain the market bid will hold. . .

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