Weekly Stock Market Commentary

U.S. Stocks continued their march upward this week as the S&P 500 closed with a 1.1% gain on the week. Historically, as far as records have been kept, a 1% up move in the first week of the year has a 100% correlation to the market ending the year with a gain. This is according to CNBC. Of course, this is utterly worthless information. However, since this is also the third year in the presidential cycle, odds are in favor of a positive year as well.

In any event, all this suggests is that the current trend is up, and for daytraders, it makes most sense to stay on the side of the trend. I've seen over and over again in recent weeks how the market opens lower and closes higher than the open. Even if it is just a small gain or a small loss, the short sellers are getting grinded to death. At some point there will be a correction, however, at this point, it is not yet on the horizon.

One of the big trades on Friday was RBN. This is the kind of move that many daytraders miss. The stock gapped significantly at the open, and many daytraders simply like to fade this kind of gap. However, a more experienced trader would look at the daily chart and see a favorable set up for a big up move.

After the stock gapped higher, it moved significantly in the first five minutes. It is virtually impossible to try and scalp such a move. In fact, it would be foolish, because you would be leaving a lot on the table. Better daytraders and short term traders would look for a bigger move.

Based on our strategy, an entry point would have been somewhere just under $40. The stock closed at $41.18. The chart is below

Scott Cole
www.bestdaytradingstocks.com