S&P 500 Trend Update (Week 5)
February 05, 2012 1:55 PM
The most recent uptrend began on December 21 and showed the first sign of weakness during the past few days after the SPY closed its unfilled gap since July 28, 2011. As previously announced, one level at the 129.50 area did act as support.
Bullish market participants finally proved their case on Friday by breaking out for higher highs and not allowing any further progress from the bear’s side. This is very encouraging price action for traders like myself who hold long positions and are unwilling to budge. Unless proven otherwise (such as with a stopout), a classic trend follower will sit out the smooth ride.
To find out how to correctly manage and trail your stop-loss order, you may find my recent post a welcome read. In it, I illustrate how a trend follower can gradually lock in increasingly more profits without jumping off the wagon prematurely. Although the market appears to be accelerating higher, the stop-loss should be trailed before one is too traumatized at the next bigger sell-off.
