-- Posted Tuesday, 27 March 2007 | Digg This Article
By Jack Chan at www.simplyprofits.org
3/23/2007
Despite this week’s FOMC induced rally, nothing has changed in the big picture. The three sectors of tech, gold, and energy which we cover, have been in a corrective phase and therefore, have been and still are stuck within a trading range for the past few months.
The chips have been stuck inside a 7% trading range. Barely budged this week.
and the cube is even more challenging, a 5% trading range. Had a nice pop on Wednesday after the neutral stance the Feds have switched to, but still short of the upper resistance.
GDX, the gold stocks ETF is a little more generous, with a 13% trading range. Also a nice pop after the Fed’s meeting, now at the 60% retracement of the recent sell off, and at the middle of the trading range, kind of a no man’s land.
OIH, the energy ETF is the most generous with a 16% trading range. This week’s vertical ascent has pushed OIH to the top of the trading range. A continuous move up here will be considered a breakout, while a sell off may drop it back to the lower trading range.
Summary
A sideways market is challenging for most traders. The sharp rallies stir up a lot of fear. Fear of missing out. The equally sharp sell offs which follow also create a lot of fear. Fear of losing. As a result, most traders are caught up with this emotional roller coaster, and get whipsawed. A lot of money can be lost as the trading range continues. Conservative traders should be patient and sit out these sideways conditions and preserve your capital until a major breakout is confirmed and a new uptrend begins. Aggressive traders can take on some small trading positions when we have set ups and when risk is manageable, and exercise discipline. But a sideways market is not all bad, option sellers love these conditions as 90% of all options expire worthless. Please consult an option specialist if you intend to be an option seller, and as always, manage your risks.
-- Posted Tuesday, 27 March 2007 | Digg This Article
