Coming Soon: Good Short-Term Trading Opportunities
Due to a technical problem, now
fixed, Dave Floyd’s column was posted late this morning. We apologize for the
delay.
That pretty much summed up my day yesterday. As
usual the opening offered one opening fade. However, the meaty trades were based
purely on what I described in yesterday’s column: Pick the entry based on the
usual set of parameters for any HVT trade,
place a stop, adjust according as the trade goes in your favor, and forget about
micro-managing.
The two trades that were candidates yesterday were
General Motors
(
GM |
Quote |
Chart |
News |
PowerRating) and Tyco
(
TYC |
Quote |
Chart |
News |
PowerRating).
Many people have asked me if I am able to identify these setups in advance
(before the opening), but sadly that is not the case. For me it is simply done
by keeping an eye on the core group of stocks that I watch. If they open and
fall with the parameters of a valid setup, I take the trade. If not, I wait
until such time that they do.
Naturally, yesterday offered two right out of the gate. Today will unfold
before us in term of the candidates.
Nonetheless, yesterday’s sharp spike higher raises some eyebrows. Was it
simply short covering? Perhaps. Or something more? I am leaning toward the
viewpoint that it is something more. Naturally, we are very oversold on a short-
and intermediate-term basis. Based purely on Fibonacci time cycles, there is the
potential for a trend change in the next few days. Time cycles do not offer
direction, they only offer time. If the cycle takes hold, given the current
trend of the market, a move higher seems likely.
As a result, this may add some good upside momentum in the days to come. Be
ready, it may be intense. Another reason to believe this is a possibility is the
latest reading on bullish/bearish sentiment. The bearish sentiment is finally
kicking in, albeit still low given the carnage that has taken place since the
last Fib time cycle which marked the last swing high on Jan. 13, 2003.
We all know by now that bear market rallies can be fierce. I already
mentioned that the price action in coming days may be conducive to good
short-term trading. You may want to consider reeling in some shorts and look to
take advantage of some long trades, at least for a few days or a week or so.
Beyond that, I really see no reason for the market to sustain a meaningful
rally.
Keep an eye on CVS Corp (CVS) as a
potential beneficiary of an intermediate-term rally.
Now to answer the e-mails regarding yesterday afternoon’s rally, “No, I did
not play it.” For one simple reason. When was the last time we had follow
through up or down? It has been a while. If you played that game all the way
down, you got killed. For me, do it once or twice more before I dip my oar in
the water. Capital preservation is paramount right now. High-probability setups
only.
Key Technical
Numbers (futures):
S&Ps |
Nasdaq |
| **840** | *1020* |
| 828-32 | 989.50 |
| 819 | 980 |
| **815** | 975 |
| 805-07 | 970 |
| 796 | 955.50 |
| **790-91** | *940* |
| 776-77 | *933* |
As always, feel free to send me your comments and
questions. See you in TradersWire.