MLR - PMP 9/24/13

Published : September 24 2013 at 8:43 ET

Major averages finished lower on lower volume despite a couple of Fed officials expressing support for continued bond purchases by the Federal Reserve. A number of leading names also had sharp pullbacks after big price run-ups including YY, NFLX, YELP, and TRLA. That said, the markets have been rallying for three weeks, and with the market's uptrend now obvious to all, the crowd may be stymied as the market goes through a process of digesting gains.

With respect to any positions in leading names that have come under pressure in recent days, one may opt to strictly abide by the Seven-Week Rule which is designed to capture bigger gains should a stock continue to rally, even after a sharp correction, if the stock tends to obey its 50-day moving average rather than its 10-day moving average. Alternatively, you could trade a core position in this manner while maintaining tighter stops on additional shares purchased further up during the stock's move. Selling into strength this year has worked better in many cases than using slower sell rules. In this light, one could also simply use a violation of the 10-day moving average as a stop on a full position, regardless of the stock's tendency to obey the 10-day or 50-day moving average.

Apple (AAPL) reported record iPhone 5S and 5C sales causing the stock to gap up at the open. However, the lack of killer apps in its pipeline will be problematic, and android which is open source will most likely overtake AAPL's closed source technology. The move ultimately may be shortable, but requires further monitoring at this time.

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