How To Trade Like Lester Love Jr.
On Friday, the Nasdaq lapped gapped sharply higher on the
open but found its high fairly quickly and sold off. It pulled back early in the
afternoon but resumed its sell off going into the close. This action has it
closing poorly.
The S&P also sold off after trading higher.
“Love” Gap Openings
In my video,
while discussing position management, I mentioned Frankie and Johnnie’s
furniture store, a New Orleans icon. They used to run commercials with the
“Special Man”, a character played by Lester Love Jr.* Anyone who had
no money had to go see the “Special Man”. His answer to
everyone, in his deep voice from behind his big cigar and sunglasses was
“Let ’em have it!” So, when I come in and see the futures up sharply,
I think to myself, self, “What would Lester do?”. Don’t hold on for
top dollar. When you are blessed with a nice overnight profit–LET ‘EM HAVE IT!
So what do we do? Well, as far as corrections go,
this certainly the clearest signal that I’ve ever seen that one has begun (based
on price alone)–a big gap opening to trap in the Johnny-(but not Franky)come-latelies
followed by a reversal. Therefore, probably the best thing to do is to continue
to scale of existing longs (hopefully, let ’em have it!) and honor your trailing
stops. On the long side, you might look to stick with strong commodity related
sectors such as independent oil & gas that can trade contra to the indices.
On the short side, I’d avoid picking tops in individual issues. Rather, look to
play the index shares, provided of course, they don’t gap sharply lower on the
open.
Looking to potential setups, Devon Energy
(
DVN |
Quote |
Chart |
News |
PowerRating), the aforementioned
strong independent oil & gas sector, looks like it has the potential to
resume its uptrend out of a pullback. Wait for entries (or signs of a reversal)
though since it (and the sector) closed poorly.
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
*Unfortunately for Mr. Love, God “Let
him have it”.
“….. I just wanted to thank you again for opening my eyes to swing trading. If nothing else , it keeps you in the mkt. (without great risk) at all times so when the big runs come, you don’t miss them. I’ve combined your entries with intermediate-term patterns, entering cup and handles on the pull-back of the handle instead of waiting for the pattern to complete and with very good results. I can’t recommend your book enough to my friends…..”
“Toro”
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