Working A Pivot Point Stop

By: Bill West | Sun, Jan 10, 2010
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1/10/2010 1:35:51 PM

Hello Everybody

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Trade Actions:

Buy RJA ( Agriculture Commodities ) at 8 or better on a Limit Order
Buy SBB ( Short SP 600 ) at 38.4 on a Buy Stop
Buy PHO ( Water ) at 17.5 or Better on a Limit Order

Tighten up stops on positions again

Market Outlook/Potential Opportunities:

The up thrust is here. It is a very unique one indeed. One day the Nasq fails and the SP moves up. Then the next day is just the opposite. Friday was an outside day to the upside on the Nasq and it established an outside week. ( Lower low then a Higher high over the previous bar ). This outside week unfortunately knocked us out of our technology fund. Where the Stock Market finally stops is difficult to ascertain, but I do have some indicators telling me to now watch out for an outside day and week down. I am not sure that will happen but just in case, we are going to implement our pivot point stop loss strategy. For clients that have been with me for a while, you should already know what this is. If you are new to the service, the strategy goes like this. We add up Fridays High, Low, Close and then divide by 3. This is our pivot point. Now IF Monday starts out strong to the upside and I am going to repeat this, IF Monday starts out strong to the upside, you then put in a pivot point stop on all of the Stock Market positions. If we start out Monday Lower, then we will just use a straight stop. I will publish both of those numbers. This is a difficult decision but we must tighten up our stops in order to protect our profits. We are running the risk of getting stopped out only to find that the market resumes its upward thrust and we are left out. That is the chance we must take. The minimum upward targets on the indexes have been meet so a correction could come at anytime. Even though the minimum targets are in I still believe S&P could hit 1200 before a correction sets in. Also the market is quite complacent here so any little trigger could surprise people. Do we get short here ? I am not convinced that is a good strategy right now, but I we are going to have one order working just in case.

Gold will end up trading between 1500 and 2000 dollars an ounce. Corrections will come like what we saw the last few weeks but we will stay with it through thick and thin. Right now Gold is taking a pause as it allows the other metals like Platinum and Palladium to catch up. If you look at these two metals, they are off to the races. Once they are all in sync again, I expect Gold to resume its upward course.

A new subscriber asked me how do I enter positions that have been filled a couple of weeks ago. It does become difficult to do and must be done very carefully. Right now it is not the time to be entering any long stock funds, but I believe that Gold and the Gold mining stock fund is now resuming its course, so you can now enter those positions. This market letter tries to max out at a ten-position limit, so each fund should carry an one/tenth weight in your portfolio.

Ditto for Copper. We are now long a Copper fund ( JJC ) . Recession or not, there is always a high demand for copper. We will have a stop working on this trade though. On an interesting side note: Did you see that China has negotiated a long-term contract with Afghanistan to develop their copper mines. We do the dirty work and China picks the fruit.

Current Long Portfolio:

Buy SSO (Proshares Ultra SP 500) at 36.6

It closed at 40.4

Sell stop at 39

Pivot Sell stop at 40

Bought JJC (Copper) at 42.1

It closed at 46.9

Sell stop at 46.4

Bought ITA (Aerospace) at 48.8

It closed at 53.5

Sell stop at 52

Pivot Sell stop at 53

Bought EPI (India) at 21

It closed at 23.1

Sell stop at 22.8

No Pivot stop

Bought GLD ( Gold ) at 107.2

It closed at 111.8

Bought GDX ( Gold Miners ) at 46.7

It closed at 49.8

Bought QQQQ ( Nasq 100 ) at 44

It closed at 46.6

Sell Stop at 45.7

Pivot Stop at 46.2

Current Short Portfolio:

None

Recently Closed Positions:

Bought RYT ( Proshares Technology ) at 41.8

Sold at 46

Sell stop at 46

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Bill West

Author: Bill West

Bill West
Fat Pitch ETF Advisory

Bill West

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