Here’s Where I’m Looking For Momentum To Come In
You may recall a couple weeks back when we had a close similar to Friday’s
(reversal day) that we may be on the verge of a reversal. You will also remember
that I mentioned that rather than jumping in blindly on a short, the previous
day’s low needed to be taken out. It never was, and you saved yourself a lot of
money and frustration. We are now faced with that same situation. Friday’s close
was ugly, technically speaking, and all the leading sectors of late suffered
some damage. So, again an ideal setup (from a longer-term perspective) is now
potentially unfolding. A trade below Friday’s low will entice me in on the short
side. You can either do that via an E-mini or by a stock.
It is likely, however, that even if the market dips below 986, there will be
a retracement, and it will be the second thrust lower that should really gain
momentum. Personally, I will be looking at a couple of stocks highlighted below.
They should correlate well with the market in the event of a good selloff.
Additionally, keep an eye on the Euro. A selloff in our market will certainly
put additional pressure on our dollar and drive demand toward the Euro
or even the British Pound, which
has a yield advantage.
In terms of stocks, consider Mattel (MAT)
and Digital River (DRIV)
We need to bear one thing in mind, the psychology of the current market is
very, very bullish. These trades are without a doubt higher risk trades, but in
my humble opinion, a sharp selloff is not out of the question. If so, the gains
will be decent. If not, use a tight stop loss, re-group and seek other
opportunities. The key is to make sure Friday’s low is taken out — 986.
In terms of HVT, it continues to be
quiet. The intraday price action, as we all know by now, is very labored, albeit
orderly and structured. The only way I have been able to navigate is to simply
bump the time frame out to a 5- and 15-bar setup. It is a very minor change and
in no way deviates from the core principles of HVT
(i.e., buying pullbacks, selling short rallies). It has served me, as well as
the members in my Trading Room very well.
Yes, the frequency of the trades is down, but the effectiveness remains very
high. In fact, with Wednesday’s hard trend up, we put positions on in the
morning and did not need to close out until the close. Granted, this is the
exception, not the rule, but demonstrates the current price action.
If the market does indeed experience a reversal, I would expect the intraday
volatility to ratchet up a few notches. This will make for an ideal environment
for HVT. Remember, we need to be seeing 3+
point “bursts” in the S&P futures in order to take full advantage
of HVT. While there have been multiple 3+
point moves lately, most fail to exhibit the range expansion bars that I like to
see.
| Support/Resistance Numbers for S&P and Nasdaq Futures |
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As always, feel free to send me your comments and questions.
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