Hurry Up, It’s Time to Get Patient

• Posted by Greg Harmon
• on February 15th, 2011

The major indexes are now breaking away from key Fibonacci levels and 100% returns from the bottom. It is not surprising that there has been a bit of noise, played out as sideways consolidation, as this process has occurred. But as the dust settles and markets continue higher it will be important to become a patient trader. This does not mean sitting on your hands if a stock hits your target or even widening your stops.

The Patient Trader

The concept of a patient trader is quite simple, instead of focusing on the minute details of of daily charts, take a step back in timeframe and look at weekly charts for a while and discovering setups that may take longer to play out but can be more lucrative as well.  Sure there will continue to short term break outs but longer term dynamics will gain more importance.  Let me walk through an example below using American Express, ticker: AXP.  First look at the daily chart of AXP below.

AXP is trying  to break out of triple top formation.  It has approached the top from a higher low each time.  If it gets through the top at 46.67 this time then it could run to 53 assuming symmetry with the move from 37 to 47 repeating now from the low of 43.  That is not a bad find.  But pullback and look at a longer chart on a weekly timeframe and it gets even juicer.

Now you can see that AXP has been in a 16 month channel and a break out higher would set a target of at least 61.50.  Without looking at a more patient timeframe you may have taken off you trade at 53 if it consolidated there for a day, and potentially missed more upside.

If this market continues to move higher through these key areas, the next key area will be that much further away.  The trend will start to play a bigger role in all names in the shorter time frames.  I believe that is what people are getting at when they say the easy money has been made.  Those that can step back and see bigger picture opportunities will be winners in this new market.  Start practicing now to get a head start.

By the way, this was one of 4 ideas I shared on financial names last night Financial Thaw Uncovering Diamonds in the Rough

(As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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