When a very strong stock fails to make a new high after consolidation some traders are on the prowl to establish a short position.  Don’t make that mistake!  Let me first define what I mean by a “very strong” stock.  A very strong stock is a stock that is trending up for the day and is in an uptrend in higher time frames as well.

(the price action discussed is from October 6th) FCX is a very strong stock.  On the Open it drove higher breaking through its multi-year high.  It quickly found 93.  It consolidated above 93 for a few minutes and then found 93.50.  After a pullback to 93.06 it failed to make a new high on its next up move.  This is not a reason to get short!  Perhaps you could be somewhat more cautious on a long position at this point don’t get short.

Also don’t get short if it trades below 93.  It is possible the stock is putting in a top but this does not mean it is time to get short.  Use the pullback low after it drops 93 as a stop for your long position.  If it begins to consolidate above 93 again nibble on the long side and add to your position when it takes out the intraday high.