It’s time to be very careful with open profits.

I will keep this short and sharp, as no number of words can predict what is going to occur next on a trade by trade basis. The VectorVest Composite UK is shown below where the rising wedge that I have spoken of here has completed.

vv comp uk

The price of the Composite has risen while the MTI has fallen. This is known by technical analysts as bearish normal divergence, and as the name suggests, it invariably precedes a reversal.

The target from the rising wedge infers only a modest pullback in the trend and it will probably be a buying opportunity in this very strong underlying trend.

I remain very bullish for the first half of 2017, but feel with around an 80% confidence that the first few days of March will see a pullback of the same vein as occurred during November 2016.

On VectorVest, the short term trend is down while the underlying remains upwards.

I was optimistic of support holding on Hill and Smith on Thursday past, but Friday’s trading saw support fail. Such is the life of a support and resistance trader. I will watch the stop on this share carefully on Monday morning.

I have excellent open profits in many shares at the moment, and it seems appropriate to bank a few of these soon. In particular, the small cap shares need careful thought. In any selloff, shares such as Sopheon, Ab Dynamics and Victoria will be difficult to exit without giving back much of the gain. I don’t hold Victoria myself, but I know that many reading hold the share. I called it on Tip TV a few weeks ago.

For me, the technical evidence supports exiting positions that haven’t moved in the upswing and banking some open profits soon. This would become more urgent upon a close below the upsloping trendline on the chart above. Also, if the DEW market timing technique were to print a sell signal, that would add significantly to my motivation to raise cash.

This course of action is in sync with my trading plan, but it may not be appropriate for you. The downside, of course, is that we may well have to buy into these shares at higher levels.

It’s time to be diligent, strong and resolute.

David Paul

February 25th 2017

 

10 thoughts on “It’s time to be very careful with open profits.

  1. this is a bubble about to burst. i am thinking purely from a uk prospective 1) inflation will rise sharply due to the value of sterling,2)the real cost of brexit will cause a ? in the process 3) insurance premiums will rise (i hear tonight).4) there is every chance that the trump will be a)assinated,b)not get anything through congress and then c) resign.
    the conclusion from all this is that interest rates will rise , probably like all markets much quicker than we expect , lets hope i have sold my house by then .
    conclusion buy the pound ,buy ftse puts (which i can no longer do on my trading platform.

    1. hi Pete …I will just trade the signals as they come along…I was taught years ago to take off my opinions as I hang up my coat when entering the trading floor. Holding positions but wary …good trading david

    1. Hi Clive …I should probably have said a share with low liquidity. Small cap to me is less that 250 million market cap I hope that helps david

  2. Hello David
    Where will you be placing your stop for Sopheon? The V.V. stop is at 414p that would be okay for me, but I’d like to be a bit greedier and put it at 450p.
    Can you say where you will put your stop or are you legally bound not to??
    Alex

    1. Hi Alex I am personally just using the VV stop but may cut earlier if the DEW gives me a market signal. As of 2nd March I am still onboard…See you at Oxford in two weeks I hope best wishes david

    1. Hi Victor I am still in all my positions. I was going to get out of Ab Dynamics but it came right before I got around to taking action. This is my 35th year at this business so don’t faze that easy best wishes david

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