Yesterday we discussed that a buy signal on the MDM might be a good indicator that short positions should be covered. That was yesterday, and now that the MDM is on a buy signal as of today, the one problem with the buy signal is that there is a dearth of buyable leadership with respect to individual stocks. In fact, our short-sale targets, GMCR, BIDU, and FOSL, remain somewhat weak, with GMCR floundering around the 82.40 undercut low of two days ago, BIDU running into possible resistance at its 50-dma, and FOSL unable to rally much aboe its 50-dma.
Thus we feel that any members looking to short this market if the rally begins to falter should be aware of these situations since we have been stalking these stocks on the short side. If there is a market rally it could turn out to be one of those strange index rallies that are quite playable using index ETFs on the upside while individual stocks and short-sale targets may remain weak. Thse should be focused on in the event the market rally does run into trouble.
Keep in mind that using a buy signal from the MDM as a "cover all shorts" type of signal can be prudent, but not necessarily optimal, and using it as such is no "holy grail" but rather a tool for minimizing risk on the short side. In the meantime the buy signal from the MDM is fully playable using ETFs, while keeping some short ideas in your trading "quiver" might be a good idea here.
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