Take Profits On the Open Today – Sell Half and Use SPY $284 For the Rest
POSTED BY PETE STOLCERS ON JANUARY 26
The market has a strong tailwind and dips should be bought in Q1. Buyers are gobbling up stocks and 2018 is off to an incredible start. Gaps higher have been met with resistance and we are seeing profit-taking on the open. This is a sign that the momentum is starting to slow and that a conventional pattern of lower opens and higher closes is about to begin.
After almost a 200 point S&P rally in the last month we should expect some retracement. Take profits on half of your position on the open today and move your stop up on the rest.
I believe that the FOMC statement next week will be relatively hawkish. That could spark a small wave of profit-taking. Dips will be brief and shallow. Rising interest rates are not a problem because they are accompanied by strong economic growth. The pullback would be a temporary knee jerk reaction. Global growth is excellent and central banks are tightening. Interest rates are at historic lows and there is plenty of room for them to move higher before they impact growth.
Trump outlined some immigration concessions and both parties might be getting closer to a deal. This should bode well for the upcoming debt ceiling/budget negotiations.
North Korea has halted missile testing ahead of the Olympics and that dark cloud has temporarily parted.
Earnings season is unfolding and the guidance has been exceptional. CEOs are optimistic and they are investing in plant and equipment. Employee bonuses are being paid out due to the tax cuts and that will boost discretionary spending.
Swing traders should take profits on half of their positions on the open today. Stop the other half out if the SPY closes below $284. I am not bearish; I just feel that the momentum is starting to slow. After a 150 point S&P run it would be foolish not to take profits on some of your positions.
Day traders should look for an opportunity to short the opening rally. If the bid starts to crumble right away get short. This has been the pattern the last few days and resistance is building. If the bid holds through the first hour you should abandon this strategy and look for an opportunity to buy strong stocks. Those opening reversals will reveal themselves early if they are going to happen. If we do get a reversal, look for opportunities to buy strong stocks once support is established. We are seeing nice intraday volatility.
Take some chips off the table and let the rest ride as long as we close above SPY $284.
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