We’ve Entered a New Uptrend, Here’s What to Watch For

by Darrin Donnelly on August 30, 2011

Last week, the market shifted gears and fought its way out of a sharp Downtrend.  As we enter a new Uptrend, there are a few specific rules to follow and conditions to watch for.

First, remember that the initial days – and sometimes weeks – of a new Uptrend are often choppy.

That means, be prepared for some pullbacks.  Most of these are a normal part of the process, but some are not.  Learn to recognize the difference by watching the volume behind these moves.  The heavier the volume, the more significant the move.

On that note, understand that some Uptrends jump out to fast starts and then stall.  They can reverse right back into Downtrends, so you don’t want to load up on initial positions too aggressively.

Instead, EASE into new positions.  There’s no rule that says you have to buy 100% of your intended position all at once.  Start out buying half your intended position and then add to it as your stock climbs and the market proves it’s serious about trending higher.

Here’s a rule that is important for ANY trade you make, but even more so at the start of a new Uptrend: KEEP YOUR STOPS TIGHT.  And don’t ever second-guess them.

This Uptrend’s start is unique in that it began at the end of August; a time when trading is light as many on Wall Street take their final summer vacations.  It doesn’t mean that this Uptrend is phony just because it began on below-average volume.  But, it does mean that we want to see some conviction when volume picks up again.

Pay attention to individual LEADING stocks.  They’ll tell you how strong this Uptrend is.

How do you know which stocks are true leaders?  They’re simply the best of the best in terms of both technicals and fundamentals.  Don’t get reeled into an Uptrend by trying to buy “junk off the bottom” stocks that have a high failure rate.

Which brings me to another very important point.   When an Uptrend begins, you’ll see lots of stocks breaking out and rocketing to new highs.  You have to be very disciplined and avoid chasing every little stock that gets mentioned on CNBC.  Only buy true leading stocks.  That is where the fortunes are made.

A rising tide lifts all ships and a strong Uptrend will lift even sub-par stocks.  But such stocks will fizzle out quickly.

True leaders, on the other hand, will make massive runs and will weather the inevitable dips that the market throws at them.

* You can access our list of leading Darvas stocks – with EXACT buy and sell points – by clicking here and instantly downloading Darvas Trader PRO.

 

{ 4 comments… read them below or add one }

David Thomas August 31, 2011 at 7:21 am

Another awesome post!
I’ve been in cash waiting patiently for a new uptrend and the FTSE here in the UK has yesterday (30th August) broke out of a symmentrical triangle. Time to jump on board with leading stocks! Your advice in this post is timely and again, I can only urge the newbies to take note because it will help your trading enormously.
Cheers
David

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Darrin Donnelly August 31, 2011 at 9:55 am

Thanks David, that is too kind of you – much appreciated!

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T T September 3, 2011 at 12:43 am

Great post!

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Darrin Donnelly September 3, 2011 at 10:40 am

Thanks, much appreciated!

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