We are now officially into the month of May and I shall be looking for a seasonal top in the coming weeks. For nine weeks now we have had two primary upside targets [The trading range breakout suggesting prices wanted to move an equal distance above the old range: 125.19 & the highs from Aug. 2008: 126.24]. While these specific numbers have yet to be hit, the market did rally to a high of 122.12 (or 3 points below our first target) just last week. Should this represent the seasonal highs, I would consider this to be a 'close-enough' move to satisfy our objectives.
If this indeed is the start of a short term correction one ought to expect at least a 50% correction of the most recent move higher. Our 'Investor' stop still sits just below the lows of February of 104.14. Add this to the most recent high (122.12) and divide the result by 2. The 50% level then is 113.13. As well, I do notice that there is a small gap at 110 that ought to be filled at some point down the road.
For the record, there are no specific sell signals with this current consolidation. Traders ought to look at this as an opportunity to buy stock on a pull back while 'investors' ought to just sit tight. The relationship between the 13 EMA and the 30 SMA still looks bullish and we shall remain 'investor' bullish until these moving averages cross again...
That's all for this week,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com
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