A pause for reflection. Mon Mar 30

It's midday and the xjo, top 200 index, is down 45 points or 1.2%, recovering somewhat from a low of down 58. This is in line with moves in the US on Friday.
I haven't done anything yet today and the question is whether to get out of any long positions. I feel that they're all ok on a weekly basis but that a few of them have the potential to pull back sharply in the shorter term. This also raises the question of how consistent I should be with time frames. For example, if I've put on a position due to a breakout on a weekly chart should I only cut my position on the basis of a weekly stop? My answer is sometimes yes, but more often no. I'm using weekly signals as my primary decision making tool but I still prefer to get in ahead of any potential breaks. Sometimes, that's from a simple weekly pivot but I'm occasionally using a confirmed break on a daily or 30/60 minute chart to get in ahead of that. In those cases, I'll use tighter stops but my goal is to be able to ride the trade for longer. There are other situations where I'll decide to cut a position such as: at a profit target, on a fast gap, where there is a complete looking pattern or when it looks like there's a retracement in action and it could be quite deep. I want to leave room for intuition and for the sense of flowing with the market action because often I don't work out till later why a stock looks good; but I also want to examine these trades and work out when it's just wishful thinking.
One thing that I do often find problematic is to have too many positions and I am planning to cut a few of those outside the top 50 and my little list of favourites. At the moment these are aoe, ctx, and mgr. It may not be today however, I want to act at the right time.
I've been through the top 50 this morning and the stocks that I was thinking would develop as shorts have done so: these are bhp, lgl and ncm. I like ncm best of all of these. In addition I've got bxb, ipl and shl as potential shorts while fxj is the only long.

12.45 I've put on a few short positions now in lgl, ncm and shl and I'm trying to sell out the balance of my mgr position at 94.

Lgl first, the weekly chart shows a 5 wave advance with the pullback in late February overlapping the 3rd wave high in late December. There was a recent attempt to make new highs last week which faltered and now we have a break of last weeks low of 318. A confirmed trend change would require a move below 282 but I would rather go early on less evidence as I'm confident in my reading of the situation.

The daily chart shows a clear sell signal as the stock fell from 343 to 318, had a small rally and has now been as low as 316. My concern is that the pivot at 308 from 11 bars back might act as support and the stock rally back towards the highs. I'd therefore consider having a pretty tight stop early on, perhaps 330 which is just above Friday's high.

Next is ncm which has a very similar 5 wave advance as lgl but with a more complex 4th wave correction. It also seems to have failed on an attempt at new highs and has marginally breached last week's low of 3211 this morning.

I prefer this chart to lgl because the daily chart has clearly started to overlap giving me greater confidence that the retracement rally is over.

My short term problem is that the 30 minute chart is very extended with a bullish reversal forming so I've bought back my short and gone slightly long with the intention of reinstating the short later today. I think it could rally back to a recent trading range around 3270.

While I am looking for a change of trend in lgl and ncm, shl is more straightforward and I'm being more agressive here. The weekly chart shows a 3 week reversal rally which is well short of the previous range suggesting that the downtrend is still in place.

Skipping to a 60 minute chart (a daily break would be triggered if the stock traded through to 1080) there is a second time break of 1120 which could have enough momentum to trigger the daily (and at the same level, weekly) break. Because this is quite pre-emptive I haven't put on a full position and would cut if the stock were to rally much above 1140. 1.25 Decided to sell out of aoe as it continues to look a bit weak and I want to stick to the top 50 mostly. Sold at 276 vs entry price of 275 for a cost covering trade. Sold ctx at 979, looks pretty good on a weekly but soft short term; entry was 910. Sold last of mgr at 93.5 with a buy price of 85.5.

1.38 The rally in ncm didn't go far so reinstated my short position at 3215.

2.15 Getting a bit trigger happy and sold out of the balance of my tls position at 324. Because it was a straight reversal trade I was targetting 330. It got to 328 on Friday and today is an inside day. I still think it can get to 330 but my scenario is for the stock to fall to 318-320 first, so if that does happen and the stock resumes I might try to reinstate a small position. Entry level was 310. And out of gpt at 43.5 vs entry of 39.5 as the daily chart falters and the weekly break hasn't happened.

3.30 The market has had another leg down and is now lower by 2%. My positions are: long - cnm, fmg, gmg, lnc and tah and short - lgl, ncm, shl. My longs, with the exception of cnm, have taken a bit of a hit but I want to stay in them. I'm close to a stop in gmg but the stock will probably hold today, while tah has pulled back to the breakout level. Fmg and Lnc are having sharp retracements after good rallies but look incomplete. By incomplete, I mean that I expect a new high in the short term. Here's lnc as an example.

There was a fast break last Thursday taking lnc from 190 to 246 by Friday morning. Once a short term peak is formed you can expect a sizeable pullback yet typically you can also expect to see a new high in the short term even if it's quite marginal. Here's an example from the same stock, Link energy, earlier this month.

There was a breakout on the 9th from a tight range. The surge retraced for nearly 3 days although the price held pretty well and then popped up to a new high.

4.24 A pretty crummy end to the trading day as my longs went nowhere and my shorts pushed up a bit. It may not be the end of the short term rally but it was a big warning day that we might be getting close so I'm happy to have taken a more neutral market position. Now I have to hope that my stock selections are correct.