Ho ho ho, Santa has finally arrived on the scene as far as the markets are concerned.
I have been trading a long time, and this is a VERY tricky tape. You think you have it figured out, and overnight the trade completely changes. Yesterday, it felt like we had a weak tape and are heading lower. Then today we get a gap and go, and shorts are have to be lightning quick to avoid getting rolled up in a big way. As a trader it leaves you scratching your head, but that it today's market and we have to adjust to this new paradigm.
This rally should stick for a few more days and probably will play out very much like the rally the week after Thanksgiving. We will probably will work ourselves back to the 200-day moving avg at minimum. Could this be just the beginning of a bigger Santa Claus rally?It certainly could be, and if it does you have to look at the strongest stocks first.
The stocks I'm looking to trade during this rally are Google (GOOG), Chipotle (CMG), Apple (AAPL), Visa (V), MasterCard (MA), just to name a few. Most of these stocks have hung tough in the weak tape and if we continue to rally these will likely lead.
Still, I wouldn't forget about some of the former momentum leaders, either. Amazon.com (AMZN), as long as it stays above $180, should regain some momentum. Baidu.com (BIDU) and other Chinese stocks like Sina (SINA) and Sohu.com (SOHU) woke up today and look good for a multi-day run from the lower end of their ranges. The Chinese stocks face a lot of skepticism after some of the controversies we have seen this year, but the selling could get a reprieve temporarily.
The majority of trading this year has been headline-related, and that doesn't look likely to change anytime soon. Make sure you take note of how you are trading, and understand that every day you are in the market you add a little bit of knowledge and experience that helps you get better.
2011 has certainly been a year of learning for me, as a lot of my old rules did not apply to the action. The reason I have persevered and prospered over my 13 year career in this business is that I have the ability to adapt. When I noticed persistent changes, I didn't just get mad and brush them aside. I may have gotten frustrated at times... but I make sure to learn from the mistakes and successes alike. I will continue to make adjustments in an effort to stay on top of the game.
*DISCLOSURES: Long AMZN, GS, SINA, WYNN, FIO, VMW
