Recently we’ve been talking about the only pattern you’ll ever need to know in uptrending markets — commonly refered to as a Pullback Off Highs. And over the last 10 days, a bunch of names took off out of bases and low risk entry points like rockets.

All of those same names got away from those low risk entry points very fast, leaving only higher risk entries. Just take a look at the charts of the market kingpin leaders: AAPL, GOOG, BIDU and GS. Each of these — and many other stocks — is extended from any low risk entry point. Buying them here would surely be of the “dog chasing the bus” types of trades at this point.

So where does that leave us if the majority of high quality names aren’t anywhere near prime buying entry points?

That’s where the 12 Most Important Words You Need to Know comes in…

What Do I Need to See to Make Me Take a Trade?

What do I need to see to make me take a trade? Ingrain these 12 words in your brain, write it down next to your monitor or make it into a poster — it will serve you well the rest of your life.

Below are a couple of examples of names that have recently answered this very question. It’s what we want to be on the lookout for from here:

Both of these issues pulled back from recent highs as shown by the pink lines. They pulled back to chart support coinciding with the 50-day moving average. A break above the pink Pullback Off Highs line triggered a long side trade — and away they went.

So in the spirit of “buy the dips and sell the rips” — you now know what you need to be looking for…

As far as the indexes go, if they do go higher from here, you need to be aware that it’s a climax run. This sucks in all “the fear of missing the rally” folks in after they already missed it. It’s also the beginning of the end of a market’s rally…

Sincerely,
David Grandey
All About Trends

September 21, 2009

David Grandey

David Grandey is the founder of All About Trends, an email newsletter service revealing stocks in ideal set-ups offering potential significant short-term gains.  A successful canslim-based stock market investor for the past 10 years, he has worked for Meriwest Credit Union Silicon Valley Bank, helping to establish brand awareness and credibility through feature editorial coverage in leading national and local news media.

View articles by David Grandey