Trading Plan For Next Week

I looked two years back just to see how market usually behaves after such big up weeks after longer corrections. I found two such occasions as displayed on the SPX chart below.

Now I have good news and bad news. The good news is that after that market produced a rally into new highs on both occasions. The bad news is that there very few if any pullbacks on which late-comers could jump in. If the same story repeats this time we may not get any decent chance to ride the next wave up. To avoid this my plan for the next week is the following:

• I intend to take advantage of any little pullback that I may get. So every weakness, even intraday, for me is a buy signal. Market is now very overbought and really should give us at least one minor test.
• I divided stocks in my watch list into two categories, the breakout and pullback category. Stocks which haven't yet had a breakout out of their bases are in the first category. If any of these stocks breakout, I will buy it regardless of the market.
• Stocks which have already broken out are in the second category. I'm waiting for pullbacks in these stocks. Any test of the breakout area in the range of 5% for me is a buy signal.
• Of course, I don't want to get all in at once, that's not my approach. Currently I'm long FOSL with position about 20% of my account. I will not get above 60% account exposal in this round. If market provides me another opportunity I will continue up to the 120% maximum.

These are among the top stocks in breakout category: VRX, TNAV, INSM.

Some of the top stocks in pullback category include SODA, QCOR, BBRG, BGS, ECYT and GCO.

Most of the leading stocks have already had their breakouts so I really do expect a decline of at least 1 – 3% in the market, which should correspond in 3 – 5% corrections in the leading names, which should be enough to panic weak holders and force them to sell their shares to strong names.

Just to remind you. These are all just speculations. Market could do just about anything. It could just rise for another two weeks or plunge down to new lows. The reason why I'm ready for some aggressive buying is that the market conditions historically seem to be in my favor and here have also been some very clear breakouts that provide me safe, tight and logical stop prices. Thus, respecting my money management rules I should not loose much of my account even if I'm dead wrong.