Time to be Careful

Posted on March 26, 2012 by Jan Arps' Traders' Toolbox

Hawk’s Scan Sentry Report March 26

Well, clearly the American stock indexes are drawing back and everyone wants to know if this is the end of the rally, or is this a buying opportunity? I look at hundreds of charts every weekend and I must say that I am seeing a lot of bearish pivot divergences in the recent highs. Of course, we all know that strongly trending markets are known for giving several false divergence signals before they finally run out of steam. That is what I think we are witnessing here. In the long run (6 months – 1 yr) I am still bullish; I believe that this rally still has more fuel in the form of sidelined money that will eventually push some stocks higher. For the short term, however, I’m tightening my stops and I am being a bit more cautious about the set-ups I’m willing to trade. I am,nonetheless, still looking for good pullback opportunities as well as valid breakouts from congestion.

Here are a few items from this week’s watch list and a little explanation of the technical analysis indicated on the charts. If you want further explanation of any of the indicators on the charts below you can find a ‘legend’ at this link.

_____Longs_____

ESL

(Here we see a breakout of the down trendline and a continuation of the Bull Flag progression after a nice pullback into the Triple Trender.)

UTIW

(A breakout from the down trendline after a pullback into the Triple Trender. Also note the strengthening Radar1 Fear/Greed indicator. )

_____Shorts_____

TOL

(Note the diminishing bullishness in the Radar1 Fear/Greed indicator creating a bearish pivot divergence. I would not short this stock, however, until all three Trenders are bearish and Radar3 Trend Strength crosses below zero. )

AEC

(I like the recent Overbought TE-1 signal and the selling pressure indicated by the Radar1 Fear/Greed indicator.)

May the trend be with you,

Hawk

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