Beachhead Established!

The market stalled out after Tuesday's big run-up. But our picks held on. Only AAPL and GOL took big hits (-1.5% and -2.4% respectively), although AEOS retreated a bit, too (-1.1%). None triggered a retreat (-7%), and my overall position was slightly to the good (+.4%).

I added two more purchases, as well. DRIV, which has been on my watchlist for a long time, has retraced back under 52 where it has strong support. I bought at $52.22. BWNG broke out of a cup and handle last week; I picked up 1000 shares at $12.63.

In two days I have gone from an all cash position to about 45% invested. At this point I wait to see which of my nine "soldiers" are going to move out and which ones are going to run for the rear. The cowards will be shot; the heroes will have additional shares added to their positions. In these circumstances, I will be pleased if five of these stocks live through October.

On the Attack!

Today's up-move in the market means that my entry conditions are met. I've been waiting on several stocks; now I am buying. Here are my Top Ten:

GILD (Gilead Sciences) Nice continuation pattern; buy at $66.20
Bought at 66.29
ASFI (Asta Financial) Exploding out of cup and handle; $38.50
Bought at 38.79
ICE (Intercontinental Exchange)Nice retracement: $68.75
Bought at 69.20
JCOM (J2 Global Comm) Coming out of cup and handle: $27.00; Closed at 27.20
FMD (First Marblehead Bank) Explosive up-move: $65.65; Closed at 66.18
DRIV (Digital River) Great trending chart: $51.50; Closed at 52.91
BWS (Brown Shoe) Strong move after consolidation: $35.50; Closed at 36.03
TWGP (Tower Group) Gapped up last week, still rising: $33.00
Bought at 33.28
AEOS (American Eagle Stores) High risk, but moving up: $44.50
Bought at 44.67
GOL (Gol Linhas Aereas) Gapping up on lower oil prices: $36.45
Bought at 36.60

Also Bought AAPL at 77.67; AAPL closed at 77.61

Warning Flags Still Flying

The DOW ended Friday's session down another 25 points, and the Nasdaq dropped almost 19. I remain on the sidelines again today. But there is good news: volume was much lighter than yesterday (although that may have more to do with Jewish holidays than lack of sellers), and a number of stocks on my watch list hovered on their 50 day lines. I think the market is winding up for a sharp rise, perhaps next week. Beginning next week, I will post my top ten Watch List stocks (with explanations).

Rules are Rules

Although I fully intended to plunge back into the market today, my first rule was violated: the market was not able to continue its uptrend for a fourth day. As I write this, the DJIA is down 86 points. One of my gurus, Phil Erlanger, puts it succinctly today:

"The S&P 100 index remains in a cycle of uptrend/pullback rotation. A downtrend has yet to materialize this month, despite the negative seasonality. This fighting off of the seasonal tendencies speaks well for the potential of Q4 for investors, but the seasonal period of negative tendency is not yet passed. The next positive period of seasonality does not get underway until the third week of October. That said it has been constructive for the market that it has held things together."

So I am staying on the sidelines for another few days it seems.

The Rules: Rule Number One

My investing style requires that I precisely follow a set of rules derived from William O'Neill's IBD methodology.

Rule Number One: Determine market direction.

In my case, I only take long positions. Most of my capital is sitting in tax-qualified accounts, so I can't go short on equities, although I am willing to buy puts or sell calls. For this reason, I look for markets that are trending up or sideways. For a market to qualify as trending up (confirmed rally), it must close "up" three days in a row on rising volume. Thereafter, it remains in a rally until it suffers four distribution days in which it closes "down" on volume higher than the six week average daily volume. These distribution days do not have to be consecutive days, but they normally have to occur inside an eight week window.

Sun Tzu Toasts You

The ancient chinese military strategist postulated thirteen lessons on strategy and tactics in warfare. These teachings can be applied to investing. From time to time, I will expound on these observations and rules as I apply them to my individual trading situations.

Purpose of this Blog

I am a trader. This Blog gives everyone a chance to see how I view the markets, how I make my decisions, and what kind of results I achieve. In addition, I will post key articles and sideline observations about the stock market and personal investing as a source of income in retirement.

I begin with a portfolio of approximately $300,000. Today is the evening before my plunge into the market after sitting on the sidelines for the last 60 days.