Consider This Before Getting Short
On Wednesday, the Nasdaq gapped lower on the Intel news (a)
but quickly found its low (b) and began to rally nicely (c). However, it found
its high by mid-day (d) and sold off for the remainder of the day (e)–finishing
just about where it started.
It remains below
its recent trading range/50-day & 200-day moving averages.
The S&P also bounced in early trading but reversed to
close lower.
So what do we do? The fact that the market reversed
on cue was encouraging (see above and Tuesday’s commentary). However, the fact
that traders sold into strength suggests that the market remains in trouble. So
is this a license to short? No. The market remains oversold. And, oversold
markets are difficult to trade. If you buy them, they become “even
more” oversold. If you short them, they bounce. As you’ve heard me preach
before, it’s a damned-if-you-do and damned-if-you-don’t-situation. Considering
this, you might want to continue to wait for a bounce and then look to get short in
individual issues. Once again, on the long side, continue to focus on those sectors in
uptrends that can trade
contra to the indices. Metals & mining and and energy could
continue to provide opportunities here.
As far as setups, Amazon.Com
(
AMZN |
Quote |
Chart |
News |
PowerRating) looks
poised to resume its meltdown out of a First Thrust (email me if you need the
rules for the pattern). However, don’t get too aggressive here since a) this one
can be volatile and b) the sector is oversold and c) as mentioned above the
market remains oversold.
Best of luck with your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. My new 20-hour course is now shipping.
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