Getting Oversold
On Monday, the Nasdaq gapped lower and continued lower in
early trading. It then chopped and drifted its way higher throughout the day.
However, it gave back much of these gains going into the close. The action has
the index hitting and closing at 6-year lows.
The S&P closed lower but well off its worst
levels.
The Dow tailed down to multi-year lows (below the July
lows) but did manage to bounce from this level.
So what do we do? Monday’s sell off has the market
oversold. Further, the fact that the indices (minus the Nasdaq) found some
support suggests that we are now closer to a bounce. Therefore, I think it’s
becoming too late in the current swing cycle to establish new short positions.
Manage the ones you already have and wait for the next bounce before looking to
establish new positions.
No new setups tonight.
Trail ’em If You Get ’em
The Software Holdrs
(
SWH |
Quote |
Chart |
News |
PowerRating) have moved lower since first
mentioned (a). When a market moves in your favor like this, make sure you trail
a stop. For educational purposes, let’s trail this one at the lesser of a 2-bar
high or 1.5 points. For Tuesday, both are essentially the same (b).
Best of luck with
your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“Feel free to quote me, the book is fantastic. It is written for traders who want to know the real basis of
successful trading. No glory stuff. No hero tales. Plain old sound advice which is a rare commodity in this
business”.
Mike Marlow
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