Week in Review - Saturday January 25th

This past week was definitely an interesting one for the market. Last Monday, the 13th, the correction hit a new low. But fast forward to yesterday and the SPX is trading at new all time highs.

During that run it put in three accumulation days and then finished last week on a distribution day. So that’s mostly good news, and a little bad, especially when you consider that yesterdays distribution was on below average volume.

The first accumulation day gave me reason to believe that the correction bottom may have been in, and by the second one I had enough conviction to buy my first position since January 7th.

A hollow candlestick chart for SPX showing recent accumulation and distribution days.
Click the image to view full size

I ended up opening two half positions last week. The second I opened only after moving my stop up on ONON, so that I would not violate my progressive exposure rule.

The first new position was INTA on Tuesday and the second was TTM on Wednesday. You can see the details for each of those purchase orders here and here.

Why I Waited For Accumulation Days Before Entering The Market

One thing I found incredibly frustrating this week was watching so many swing traders I follow on X seemingly make tons of money, while I waited for more confirmation from the market that the odds of a successful swing trade were tipping in my favor.

But not everything is always as it seems with the traders you follow. I know a lot of them were taking small losses and fighting for position in stocks during the last two rally attempts, which ultimately failed.

Using accumulation days as clues to when it’s safe to start investing after a correction is a technique from Bill O’neills book, How To Make Money In Stocks. It’s on page 219 of his book and it’s part of the M in CANSLIM.

Before I increase my market exposure any more I’m going to wait for the market to consolidate for at least a few sessions, and ideally I’ll also see some progress on my current holdings.

I do believe that the correction recovery has gotten a little ahead of itself, and that the odds of new positions getting traction is greatly diminished until the market consolidates and turns back up.

I’m going to get started on a fresh watchlist for the week coming up. If you’re on my email list I’ll get it out to you before the market opens on Monday.

Want an alert when I update my watchlist and detail my latest buys? Get on my email list and I'll keep you up to date.

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