The Nemesis Of Momentum-Based Swing Trading
On Wednesday, the Nasdaq chopped back in forth in early
trading but managed to claw its way higher throughout the afternoon.Â
It remains below its 50-day moving average. 2100 remains
resistance. On the downside, the March lows (circa 1900) which also roughly
corresponds with the 200-day moving average, could provide support.Â
The S&P put in a somewhat similar performance.
It remains below its 50-day moving average and below
shorter and longer-term overhead resistance, circa 1140.Â
So what do we do? Notice above that the
50-day moving averages are beginning to flatten out. This, and the fact the
indices have essentially gone nowhere in nearly a month has me concerned that we
could be settling into a trading range–the nemesis of momentum based swing
trading. As far as the sectors, about the only area I’m seeing a few
setups is in selected energy (independents). And, I’m not too excited here
since most areas in energy remain below multiple tops. On the short side, many
of the weaker areas such as metals & mining (e.g. Gold, Silver, copper) and
interest sensitive stocks (e.g. homebuilders, REITS) (still) remain oversold.
Considering the above, you might want to focus mostly on managing existing
positions vs. initiating new ones.Â
For those who feel they must trade, Devon Energy
(
DVN |
Quote |
Chart |
News |
PowerRating),
in the aforementioned independent oil & gas sub-sector, looks poised to
resume its persistent uptrend out of a pullback.Â
Best of luck with your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
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