Monday, March 19, 2007

Stocks: 3 Day Pullback



Last week I posted a chart which showed that the average pullback for the Dow Jones Industrials is 3 days, and the range for most pullbacks are from 2 to 5 days.

Today's rally shouldn't be a surprise if you read my blog last week. If this is actually a pullback to short, I think today or tomorrow will be the top of the pullback. Today was the 3rd day up. This 3 day bounce is 295 points so far....Two weeks ago the dow had a 310 point bounce and then sold off, so shorting in this area is probably a very good entry point if you are looking to short this market.

Notice by looking at previous pullbacks you would have avoided shorting last week on a 1 or 2 day bounce. Analyzing previous swings can help you time into positions sometimes with amazing accuracy and avoid being too early.

The Fed will meet this week on Tuesday and Wednesday, so holding a position into the meeting might not be something you would want to do if volatility scares you.

2 comments:

dps said...

Kevin, The Yen looks like it may have broken to the bottom of the Sym. Triangle. Any thoughts or concerns about that?

Kevin said...

Hi DPS,

Of course I'd like to see the yen move higher not lower, but if you draw the fibonacci retracement levels, you will see that today's low is not even a one third retracement so I'm not that concerned. If the Yen retraced more than two thirds, that would bother me because that would mean the yen is most likely going back down and the S&P's are going back up and I will be losing money.

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