Uptrend to continue? Writing cash secured puts on promising IBD100 stocks; GMI: 2; GMI-R: 4

The QQQQ short term up-trend is now in its 4th day.  GMI1212

However, there were only 4 new highs and 100 new lows in my universe of 4,000 stocks on Friday.   Still, 58% of the Nasdaq100 stocks closed above their 30 day averages. The GMI closed at 2 (of 6) and the more sensitive GMI-R is at 4 (of 10).   I tend to look to buy stocks when the GMI rises to at least 3. Friday was the 4th day of the current QQQQ short term up-trend. In a few days I will have a better idea if this up-trend has legs……..

In an up-trending market (as measured by the QQQQ), I like to trade the IBD100 stocks.   The IBD100 lists contain the top 100 growth stocks that meet the stringent IBD technical and fundamental criteria.   A new list is published by IBD each Monday.   From time to time, I create a watchlist in TC2007 containing the current IBD100 list.   I now have a watchlist containing about 660 stocks that have appeared on selected IBD100 lists over the past year.   The IBD100 growth stocks tend to perform quite well when the market is rising.   Tonight, I ran a TC2007 scan I have created, on the stocks in this IBD100 watchlist and found 10 present or former IBD100 stocks that appear to be in strong up-trends: EBS,DLTR,ALGT,THOR,INT,APOL,AVAV,LHCG,SHEN,GTIV. I do own a couple of these. But I also have written cash secured put options on some of these stocks with strike prices below the support level .   I am basically betting that the stock will not break below support by option expiration this Friday.   If this technique works out, I will write more about how I do it in a future post.   Writing cash secured puts is equivalent to writing covered calls on a stock, but I do not have to start out by buying the stock.   The cash backing the puts I sell stays in my account in a money market fund and continues to earn interest.   So, I receive the premium from selling the puts AND the interest from the cash backing them.   Quite a nice (but not risk free) income generating technique in my IRA……

GMI: 0; GMI-R: 2; 62nd day of QQQQ short term down-trend; T2108: 21%; Some possible rockets

The GMI remains at zero (of 6) and the more sensitive GMI-R rose to 2 (of 10).  There were only 11 new highs and 57 new lows in my universe of 4,000 stocks on Wednesday.  The QQQQ is approaching a very critical resistance level.  We will know in a few days whether the QQQQ can break out and whether a new short term up-trend is beginning.  It is important to wait for the signal rather than to anticipate one. It could break either way.  In the meantime, there are a number of technically strong stocks from the IBD100 lists the past year that I am watching:  HMSY, SHEN, CWT, ASEI, INT, EBS, STRA, LHCG and PETS.  I own small positions in some of these and will wait for the start of a QQQQ up-trend to buy more.

GMI: 0; GMI-R: 0; 49th day of QQQQ short term down-trend; Worden T2108: 15%: EBS goes higher

The GMI and GMI-R remain at zero and the QQQQ completed its 49th day of its short term down-trend on Friday.   There were 5 new highs and 173 new lows in my universe of 4,000 stocks on Friday.  GMI1107

Nevertheless, there is a lot of strength in the underlying technicals.   More than 90% of the NASDAQ100 and S&P500 index component stocks now have their MACD above its signal line.   This a sign of a possible reversal in these stocks.   And a third of the DOW30 stocks have their 10 day average above their 30 day average, the highest percentage since September 22nd, and up from   0-3% for most of October.   The Worden T2108 Indicator is now at 15%, up from under 1.2% on October 9.   Only 1987 had a lower value, 0.47% on October 20, 1987.   (Worden data on T2108 goes back only to September, 1986.)   So, it looks like we are off of the bottom.   Now we need the major indexes to hold above their October lows to indicate a bottom is in place….

I remain mainly in cash and a little short. I continue to watch EBS, whose break-out I first noted with a chart in my post on October 16, with the stock at 16.66.   It hit a new high again last week and closed at $20.33.   This is the type of explosive stock at an all-time high that I like to buy in a rising market.   So I will watch it and might purchase it when the GMI climbs to 3 or above.   By the way, 2 of the 5 stocks that hit a new high on Friday were on the IBD100 list, AFAM and EBS……