Market Breakout Will Postpone the Reversal – Take the Free Trial – Here’s What I’m Trading

April 24, 2015
Author: Peter Stolcers, Founder of OneOption

If you want to see what I'm trading today - take the FREE TRIAL. You will have access to every trade signal for every stock and access to an exclusive chat room where I am discussing new trades with 1Option Elite subscribers. Posted 9:50 AM ET - Yesterday, the market rallied against weak flash PMI's and the NASDAQ made a new all-time closing high. The S&P 500 is within striking distance and mega cap tech stocks (Google, Microsoft and Amazon) will fuel a market breakout today. Optimism is building and bullish speculators will pile in ahead of Apple earnings Monday. This move has not taken me by surprise, I expect it. I've been able to temper my bearish sentiment knowing that the early part of the earnings cycle attracts buyers. I'm glad were breaking out. Volumes have been light during this trading range and this will improve the price action. If the market was not able to break through resistance, we would have seen profit-taking next week. Now that new highs are imminent, that reversal will be postponed for a couple of weeks. Bullish speculators will get sucked into this breakout. The S&P 500 will make a new high, but the momentum will stall quickly. I would be surprised if the SPY hits $217 before profit-taking surfaces. I will watch for late day selling. When I see it, I will start buying puts. The breakout will fail and SPY $212 will be breached. Bullish speculators will get flushed out and the market will test the 100-day moving average. If global economic conditions continue to deteriorate and if Grexit becomes likely, we could test the 200-day moving average. I'm not calling for a melt-down, I just believe that stock valuations are rich at a forward P/E of 18 and that profit-taking will push us back into the range. The big tech stocks are getting all the attention, but if you look at most of the other stocks that posted Thursday morning, the reaction was negative. Companies are beating earnings estimates because they've been lowered. However, the real metric to watch is year-over-year growth. Profits are increasing at their slowest rate in years. The strong dollar will decrease exports and minimum wage hikes will impact profits. Central bank money printing is suppressing interest rates, but it is not stimulating economic growth. With yields at historic lows, equities remain the only game in town. Companies are buying back shares at a record pace and that is reducing the supply. Money has to go somewhere and that is why we won't see a major correction. Only a credit crisis could spoil this party (and I don’t see any current threats). I am going to day trade from the long side, but I will keep my overnight positions very small. Stocks should rally today and a breakout will attract buyers next week. If the market breaks out and the momentum is sustained for more than a few weeks, I will know that I'm wrong. I will still profit from this rally, but it won't be in an aggressive fashion. A breakout above SPY $217 would force me to adjust my forecast. Day trade the breakout. If you are a swing trader, I suggest selling a few out of the money put credit spreads in May. This rally could take us close to May options expiration. My trading system is triggering fantastic buy signals and I am focusing on stocks that are breaking out after a period of consolidation. If you have not taken the Free Trial, do so today. You will have access to every stock and every trade signal during the trial. You will also have access to Pete's List and an exclusive chat room on the website. These are the stocks that I'm trading and that 1Option Elite members are trading. You will love these trades. If you want to see what I'm trading, take the free trial or sign up for 10 symbols. . .image

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