As we kicked off the new week, the bears were convinced that all their prognosticating would finally pay off. Stocks had a relatively sizable drop last Tuesday and the failure of the healthcare bill last Friday. Indeed, with a big gap down at the open Monday morning, things were looking shaky. Of course, we mustn’t forget the power of the primary trend, and with that still in place, was it really all that surprising that the dip buyers showed up early Monday morning and continued to push stocks higher on Tuesday?
The point here once again is that all the contrarian arguments in the world don’t mean a thing until there is pricing action to justify them. We saw it in 2008 when pundits declared that the bottom was in every single time the market spiked lower, and they’ve been calling tops every single time the indices have hit fresh highs over the past 8 years. The same pundits who made those contrarian calls over and over ( and over… and over…) finally got it right in 2009, and they’ll finally get it right sooner or later again, but we just don’t find that to be an effective way to navigate the market.
Instead, we focus on the action in individual charts. When the set-ups in favor of the prevailing trend are there, that’s the way we lean. When they’re not, we don’t.
We don’t want to make it seem like it’s easy or that traders always work in our favor, but it certainly works out better for those of us that can admit that we’re not smarter than the market.
Let’s take a look at some charts:
Arcos Dorados Holding Inc (NYSE:ARCO)
Genco Shipping & Trading Limited (NYSE:GNK)
Pieris Pharmaceuticals Inc (NASDAQ:PIRS)
Brainstorm Cell Therapeutics Inc (NASDAQ:BCLI)
At the time of this post, RevShark had no positions in any of the stocks mentioned.