Today's action is again quite positive. Our universe of stocks (leading stocks) is acting strong. All MarketSmiths should be invested in this market with one caveat; watch your entry points. DO NOT BUY EXTENDED. Pullbacks are inevitable on the way up and will always catch those that are not disciplined with their entries. Do not allow yourself to get hit hard right out of the gate.

With that said, quality stocks are breaking out daily. As the leading indices continue to make new highs, stocks from the “Weekly Report of Stocks Approaching New Highs” have been a good source of ideas for the watch list. Check out a short video on that report here in our video tutorial library.

Remember to use a predetermined price point and quantity based on a recognizable chart pattern and be careful about too much pyramiding.

Also, don't just own aggressive stocks. It’s good to have a mix of a few safer, more stable stocks in the portfolio. It helps you handle the coming pullback better mentally when you own a few conservative stocks that are barely down. Consider this Large Cap Consistent Earnings Screen we shared in the August 2011 Stock Guide.

Lastly, if you can build a profit cushion you might be in a position to add to existing positions on a pullback.

Risk on,

Scott O’Neil


MarketSmith, Incorporated

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