For all the hand-wringing and second-guessing about the global economy, there's no denying this simple fact: the US stock market is firmly locked in a steady and powerful uptrend.
And while the specific definition of a "Bull Market" may vary depending on who you ask, even the most bearish of analysts can't argue with the simple facts: the overall market - as gauged by the S&P 500 - has more than tripled since March of 2009.
For those of us who trade stocks online, the question is this: "How can I position myself to take advantage of this upside bias?"
The first step is to remember that there's still plenty of room to move higher. Despite the powerful gains, the daily and weekly charts on the S&P 500, Dow Industrials, and Nasdaq Composite show there's more upside potential. With all three of these major indices setting record-high prices, the market is now in "Blue Sky" territory where there are no resistance levels caused by previous price reversals. This means that Bears have few areas to regroup as the market extends its gains.
Using the index tracking stocks - the S&P Spiders (SPY), Dow Diamonds (DIA), and Nasdaq "Q's (QQQQ) - you can access direct exposure to these uptrends. But in the vast world of equities, there's no shortage of uptrending stocks displaying similar chart patterns. In fact, many stocks have made their way to new all-time highs.
If buying a breakout isn't your preferred set-up, you're still in luck. Like any sustainable rally, the market's current uptrend has been punctuated by occasional profit-taking pullbacks. When prices recover from these temporary bouts of weakness, you'll find a bevy of promising dip-buying, trend-extending opportunities. Your odds can be further improved by finding logical support levels - a rising trendline or key moving average, for example - where a bounce is likely to take place.
The trend truly is your friend. Strong directional tendencies, whether they're up or down, make it easier to profit from set-ups in the prevailing direction. And if you're the contrarian type, bearish trades are also easier to spot; weak stocks stick out like a sore thumb when most equities are marching higher.
If you're just dipping your toes into the world of trading, this is a great time to jump all the way in. And with proper risk management and position sizing - the foundation of successful trading here at RightLine - you can minimize your risk, maximize your reward, and benefit from the ongoing recovery.
Here's to profits!
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