Bitten By A Dead Cat
On Friday, the opened higher and headed higher initially
but quickly reversed to sell off hard. This action has it closing poorly
and puts it below its February lows.
The S&P also sold off hard but managed to stay just
above its February lows.
So what do we do? I guess this is where I give my the
market is really oversold damned if you do and damned if you don’t speech. If
you try to short at these levels, the market will bounce. If you try to bottom
fish, really oversold will become, as the donkey says*, “really
really” oversold. So, no matter what you do, take it easy. One last
point, the fact that the indices closed poorly could set up for a “pop
down” opening. In other words, we could get an early morning
reversal.Â
Once again, there were very few meaningful setups. As
mentioned recently, this is normally a sign to stay on the sidelines. Therefore,
I am not going to show any setups tonight (Friday). For
the aggressive daytrader, you might look to play the aforementioned potential
early morning reversal.
Walk Through
As promised, let’s take a look at Tenet Health Care
(
THC |
Quote |
Chart |
News |
PowerRating).
On Wednesday, I mentioned the stock as a Trend Knockout (TKO). Although
technically, the signal was from the day before (a) and it had already
triggered, I thought it still looked interesting. One thing I liked about the
stock was the way it tended to follow through from one day to the next (i.e., persist). Notice how easy it was to draw a blue line through all the bars. This
simple technique will help you pick some of the best markets to trade.
Now to the “walk through”: The stock triggered
(circa 73.45) on Thursday by trading above the prior day’s high. A protective
stop could have been placed below the low of the setup (a). Now that the stock
is hitting new highs, it should not come back through the area near the entry.
Therefore, let’s assume we will trail for Monday at a three-bar low (b)–which
is not far from the entry point.
Best of luck with
your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
*What donkey do you think I am referring to? One
free month of my swing trading service for the correct answer (in the case of
multiple winners, I’ll randomly pick several).
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