Two For Tuesday: Learn From These Examples
Patterns Are Fractal
I’m often asked if my patterns work in all time frames,
especially intraday. I believe that patterns are fractal–what works in one
time frame, works in others. For example, take the Dow on Tuesday. It set up in
as a “textbook” Bow Tie on the 5-minute chart. Admittedly, it doesn’t
always work this well. However, as you can see, it pays to watch for when it
does.Â
Smoke ’em If You Got ’em
Standard Pacific
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PowerRating), mentioned Monday night as a
potential short, sold off hard on Tuesday. When blessed with such a nice, quick
profit, make sure you lock in half of your profits and move you stop to
breakeven on the remainder. As I wrote in Dave Landry On Swing Trading: “Locking
in half of your profits and moving your stop to breakeven when your profits are
greater than or equal to your initial risk, will help to generate income for
your account. This income will help to pay for the inevitable small losses
associated with swing trading. Further, barring overnight gaps, this give you,
at worst, a breakeven trade and a chance at a home run on the remaining
position.”
On Tuesday, the Nasdaq opened firmer but quickly found its
high and began to drift lower. Then after trading sideways throughout mid-day,
it began to slide in earnest as some old dude (who sort of looks like Ernest) said the economy was
booming.Â
This action has it closing poorly and puts it well below
its 50-day moving average. One has to wonder if the 200-day could be the next
stop.Â
Ditto for the S&P (and aforementioned Dow). Â
This action also puts it well below its 50-day moving average.Â
So what do we do? Tuesday’s sell off was
widespread. In fact, only a few of the 239 groups that I track managed to end in
the plus column. In the indices, the strong selling suggests that the recently
mentioned .786 resistance (and overhead resistance) is formable. Although this
is potentially ominous, I’m not sure there’s a lot of new trading that needs to
be done just yet. With that said, hopefully, simple money management would have
taken you out of the high flyers discussed lately (which were creamed on Tuesday
after initially trading higher). And, on the short side, simple money management
(see above) also had you scaling out of the recently mentioned interest rate
sensitive stocks (which are now oversold).Â
No setups tonight. Remain patient, for the aggressive, the
fact that many tech areas stalled short of their old highs could set up many
stocks here soon (as potential shorts).Â
Best of luck with your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. My new 20-hour course is now shipping.
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