Believe In What You See
My Apologies For Believing In What I Saw
Over the weekend, I received an email that told me to do
something to myself that, well, quite frankly, if I could do, I might be in a totally
different profession altogether.
Recently, we had a market that made one-year plus highs but then began to sell off
sharply. It then subsequently pulled back. In other words, it set up as what I refer to as a
“First Thrust” (see recent column archives). Shorter-term, especially since everyone who bought at or near
the recent high was at a loss, I viewed this as a top.
If this offends you, my apologies. I take things one day at a time and
“believe in what I see.”
Protective Stops On Every Trade
Brice did a wonderful job in Monday’s “Trading Lesson
Of The Day.” If you haven’t already watched it, click
here to view it. Hats off to you Brice!
On Monday, the Nasdaq gapped lower and continued lower in
early trading. Then, after a late morning bounce, it resumed its sell off. It
did manage to claw its way higher late in the day but still finished sharply
lower.
This action has it closing in on my initial target of the 200-day moving
average.
The S&P put in a somewhat similar performance.
As mentioned recently, the 200-day moving average (circa
1060) is also a potential first target to the downside here.
So what do we do? Monday was pretty ugly. In
fact, out of the 239 sectors that I track, only a handful were finished
higher–and none by much. This action leaves the market fairly oversold.
Therefore, I would use this as an opportunity to begin scaling out of existing
short positions rather than initiating new ones. Aggressive traders might look
to play an opening gap reversal in the index shares should they gap lower on the
open and then show early signs of reversing.
No setups tonight.
Best of luck with your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. My new 20-hour course is now shipping.
Click here for details.