Very nice action in the market so far today keeping us in most positions since we didn’t trade below the Monday lows. If we can finish the day strong, this should give us confirmation that the up trend is staying in tact and can give us some great high probability entry points for Wednesday. We would however not ump the gun here since we need to make sure we don’t see any late in the day weakness.
We like the fact we have already taken out the Monday highs and the market has its eye on the Thursday/Friday highs next. Even though these are very minor resistance areas they can give signs to how strong or weak the market really is. Remember key levels to watch here are at the 1383 and then 1395 levels followed by the uptrend line and old highs which would come into play if we get a strong follow through later in the week.
Here is an example of how a potential monster trade sets up
We saw a nice base on base formation after digesting the gap higher from December. We saw a nice setup on March 7 which then triggered on March 8 and ran over 14% in the next 4 days. ZUMZ digested those gains but then ran as high as 23% over the next couple of weeks before reversing on overall market weakness.
When we get a solid entry point on a strong stock we look for the chance to take some quick profits as in the case of the ZUMZ trade. What we are also looking for is a trade to survive the next 1-2 market pullbacks giving us a nice profit cushion to trade against. If this occurs and we see an orderly pullback into support as in the ZUMZ example, we can sit back and let any remaining position run with a well protected stop at breakeven.
Over the past couple of weeks we have seen ZUMZ pull back to it’s 50 day moving average, found support and is now positioned to run with any market action to the upside.
We will have more to report later in the day.
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