Swing Trading: “When Volatility Breaks Loose and the Markets Implode”
If you haven’t read Larry Connors’ column, Trading Through a Black Swan Event, please do so. You can read Larry’s column at the link below.
Trading Through a Black Swan Event.
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Many people forget that Larry wrote Short Term Trading Strategies That Work: A Quantified Guide to Trading Stocks and ETFs just as the credit bubble was bursting in 2007 and 2008. What he wrote then, in a chapter called “The Mind” is worth recalling on a day when the Dow drops by more than 600 points.
As I am writing this, the Dow has lost over 3000 points in the past 12 months. Brokerage houses are beginning to evaporate and the first bank (reportedly of many to come) was just taken over by the government. Yesterday, I watched a slew of banks announce that ‘everything was fine’ as their stocks were imploding from rumors of impending runs on their capital.
This market environment is not only isolated to the financials. GM is trading near a 50-year low, many airlines are on the brink of collapse and the ‘can’t miss’ investments of China and India have seen 30-50% losses over the past 9 months. The game is always easy when it goes in the direction everyone expected. It’s very different when volatility breaks loose and the markets implode in price.
Read the rest in Short Term Trading Strategies That Work. If you don’t have a copy, you can get one for free here.
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On the first trading day of the week, stocks continued to sell off aggressively. The Dow industrials dropped by more than 600 points, while the the S&P 500 sold off by more than 6%. All eyes and ears will be on the Federal Reserve, which will be making a policy announcement at 2:15 p.m. Eastern on Tuesday.
Financial and energy stocks were among those most aggressively sold ahead of trading on Tuesday.
Here are 7 Stocks You Need to Know for Tuesday.
Some of the more popular and widely-traded stocks over the past several months pulled back into oversold territory above the 200-day moving average in Monday’s sell-off. These included stocks like ^AAPL^, which closed lower for three days in a row, and down more than 5% ahead of trading on Tuesday.
Also in oversold territory above the 200-day are shares of ^CMG^ and ^NFLX^.
Shares of CMG pulled back by more than 6% to close oversold ahead of Tuesday’s trading. Down three in a row and also off by 6% on Monday, shares of NFLX finished at their lowest closing level since the spring.
Scheduled to announce quarterly earnings on Tuesday are both ^DIS^ and ^IFF^. Down more than 6% and 8% respectively, both stocks are trading below their 200-day moving averages.
What’s up on a down day? Shares of ^MRX^ rallied by more than 4% after closing for the previous two days in oversold territory above the 200-day moving average.
Plunging to new lows beneath the 200-day moving average were shares of ^BAC^ ahead of trading on Tuesday. BAC closed lower by more than 17%, finishing near the session lows.
David Penn is Editor in Chief of TradingMarkets.com