Another Chance To Smoke ’em If You Got ’em
On Tuesday, the Nasdaq gapped lower and after a brief
bounce, sold off hard. It did bounce again going into the close but still closed
poorly.Â
The good news is that, so far, support has held.
The S&P also sold off hard
to close poorly.Â
The good news here is that, it
too bounced (slightly) off of a support level.
So what do we do? The fact that support held is a positive,
but, it seems a little too “pat”–markets seldom do exactly what
everyone thinks they should. The other thing to consider is that we are
obviously oversold here. So I guess my oversold speech is due. Here it goes. If
you try to initiate new shorts, the market will bounce. If you try to play the
bounce, oversold will become more oversold. Therefore, I’d manage existing short
positions by trailing stops and taking partial profits. With that said, we could
get some reversal signals over the next few days. However, don’t be a hero and
try to “front run” them. I’ll keep you posted.
One sector that does look like it has some additional
downside is oil service
(
$OSX.X |
Quote |
Chart |
News |
PowerRating), mentioned recently.
Considering the above, Smith
International
(
SII |
Quote |
Chart |
News |
PowerRating) formed a bearish outside day down in a pullback and
looks poised to challenge its recent lows. If you’re looking for other setups
here, see tonight’s (Tuesday) Pullbacks
Off Lows List. There you’ll find a plethora of potential oil service shorts.
Smoke ’em If You Got ’em
Many still seemed confused
about where to get out of profitable trades and how to trail stops. First, after
a big move like today (e.g. biotech on the short side), make sure you lock in partial
profits. In other words, “Smoke ’em If
You Got ’em”. Second, make sure you tighten stops on your remaining shares
and trail stops. See the articles under Trading Lessons: Money
Management and archives of recent “walk throughs”.
Best of luck with
your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“..Your book was the best. I’ve read dozens of stock market books but when I finished yours, something clicked. Thanks for writing it and your column and I’ll see you in Vegas…..”
Regards,
Dave (aspiring trend following moron)Â
No risk,
30-day, money back guarantee.
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