Day 2 of Rally

Discussion in 'Trading' started by aaronk321, Aug 2, 2007.

  1. Stocks Bounce Higher As Rally Attempt Hits Day Two


    Posted 8/2/2007

    Another round of late-day gains lifted stocks Thursday.

    Fueled by a final-hour surge, the major indexes ended in the black. The Nasdaq climbed 0.9%. The Dow industrials rose 0.8%, the NYSE composite 0.5%, the S&P 500 0.4%. Volume eased across the board.

    The market fell into a correction last week. As the market weakened, big price drops accompanied stocks' increased volatility. The broad indexes reversed lower several times, closing at the bottom of their intraday ranges.

    Stocks again traded in an uneven pattern Thursday, following similar action a day earlier. The price swings were smaller by comparison, though. Plus, the market's stronger finishes are an encouraging sign.

    With that said, don't get ahead of yourself. Thursday marked Day 2 of the market's rally attempt. You're looking for a big price gain by one or more of the major indexes, on Day 4 or later of the rally try. Also, look for higher volume than the previous session when that price jump happens.

    Until then, the best course of action remains the same. Reduce your exposure by getting off margin. Sell your laggard stocks, both the ones that are down from your buy price and those that have managed only meager gains.

    Exercise patience. Don't try to anticipate a market upturn or a follow-through before it happens. Let the price and volume action of the major indexes and leading stocks guide your hand. Follow their lead, instead of trying to predict what they might do.

    If you decide to hold onto a stock or two, it's best if you take a stand with elite, institutional-quality issues. But as you do so, remember that every stock eventually will get hit if a correction lasts long enough, even those with the strongest fundamentals and the most robust technical action.

    Taking stock of your capital and your confidence levels can help inform your decisions.

    Say you have a stock that's up 50% from your buy point. If a correction persists, that stock could easily fall 25% off its high as it forms a base.

    Ask yourself: Is my cushion big enough and my confidence sound enough that I can sit through that kind of pullback? If you don't think you can, taking some profits off the table can help you avoid selling at an inopportune time.

    Concerns about the subprime mortgage market and tighter credit standards continue weighing on Wall Street. Thursday, Accredited Home Lenders (LEND) warned it may go out of business. Shares plunged 35%. Its acquisition by buyout firm Lone Star is now in doubt.

    Elsewhere, a pocket of resurging stocks fared well.

    Nokia, (NOK) a telecom darling in the booming 1990s, has returned to prominence. The Finnish mobile handset maker jumped 2.49 to 30.90 on more than three times its normal trade, as it topped quarterly earnings estimates.

    Two leaders, mutual fund advisory firm Morningstar (MORN) and diagnostic testing firm Gen-Probe, (GPRO) also leapt to new highs thanks to strong results.
  2. Yea nice runup but too soon to call it rally
  3. Based on IBD you'll need at least 4 uptrending days with high volume in order to start a new trend. We're still on shaky grounds. Our last correction in feb lasted at least a month.

    shit, anything can happen now. we can drop/gain 2% on the indexes tomorrow.

    I think the new uptick rule really pushed the stocks - some stocks corrected by 50% in a matter of days.

  4. 2006


    careful guys -- the rug will be pulled in the next few days.

    Up in the morning than an afternoon death spiral.
  5. I agree with you. This run up is too soon. The market needs to churn sideways for awhile. I bought some today but will probably jump out tomorrow.

  6. Hope we can sustain the momentum... If Bernanke steps up to the plate we should be able to finish the year strong!
  7. Weak short covering.
    Look-out below.
  8. Vix hasn't made a new high for the fourth day in a row, which all by itself is news. It was beginning to look like it was going to make a new high every trading day this year. (Yes, I'm exaggerating.)
    I'm beginning to smell a short squeeze.
    Of course, once that's done, we go back to the grind, IMO.
  9. Was the speed of the rally there at the end shorts covering? It looked too steep.
  10. I just don't get why some of the strong small caps with great fundamentals took almost a 40% dive. Eg. NVTL, SWIR, etc..

    What's perplexing is that SMSI jumped like crazy with only 194k of earnings. I think I'm bitter because I missed this move - I played it a couple of times.

    CMG looks overvalue but hell there's crazy momo for that stock.
    #10     Aug 2, 2007