Saturday, September 08, 2012

Saturday Rock Blog: Mr. Blue Sky ('78)

My recent track record on IWM posts haven't been stellar lately.  I've generally been bearish given the lower highs and action relative to the previously declining 50 dma.  Also, the market leading small caps haven't participated as much in the recent broader market rallies hinting at underlying weakness.  However, over the past few weeks IWM has pushed higher and broken out of a very nice base formed in 2012.  The chart now has a very nice looking cup n handle pattern.  Although the target price doesn't seem very realistic ($105), I think a +$10 move isn't at all out of the question (so ~$92.5) by the end of the year.  We can argue all day about the reasons why the market might make such a strong move up (oh its because the election, no its because of QE3, its gotta be the unlimited scope of the ECB easing), but regardless the chart is screaming "higher!"  I had an IWM call position until Friday when I got nervous and decided to take profits.  My gut tells me there will be a pullback next week ahead of the fed meeting and and even bigger pullback if the fed holds steady again.  With all of the major indexes at 52 week highs now, its clear blue skies above.
Disclosure:  I will rebuy IWM calls next week.

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