Great long trades in a down market…here’s how
Dave Floyd is a professional FX and stock trader based in Bend, OR and the
President of Aspen Trading Group. Dave’s approach to FX combines technical
and fundamental analysis that results in trades that fall into the swing
trading time frame of several hours to several days. For a free trial to
Dave Floyd’s Daily Forex Alerts
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In
last Thursday’s column I mentioned that I would talk
about some trades that did not always play out as planned or perhaps
even about a market that offers few set-ups on any given day. Today we will
discuss the latter as the last few days have not dealt us any ‘bad’ trades that
help illustrate that point.
Today however, was a trading day–to me at
least–that offered only a handful of good set-ups and those turned out to be
marginal at best. I do realize, depending on ones trading style, that today
might have been a great day for you – so please, no emails refuting my summary
of the trading day.
What was most striking about today was that the
stocks I was interested in playing–based on their technical merits such as
velocity and Fib readings–were long candidates like the oil drillers,
(
HAL |
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PowerRating),
(
SLB |
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PowerRating),
(
BHI |
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PowerRating) etc,
(
BRCM |
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PowerRating),
(
GOOG |
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PowerRating) &
(
TXU |
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PowerRating) all in the
context of a weak market. There were some solid short candidates too, like
(
QLGC |
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PowerRating),
(
SNDK |
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PowerRating),
(
HD |
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(
LOW |
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PowerRating) &
(
MON |
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PowerRating) but they were quite extended and
offered hardly a pull-back in order to get a good entry. I did take a short in
SBUX but managed to only grab 25 cents on 1/2 the position and scratching the
remainder.
The set-up in
(
SBUX |
Quote |
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PowerRating) was appealing
because some key daily support had been broken and with a weak market, maybe the
gap price at 48.13 could be breached. While this did not play out the way we
haf hoped, there were some gains to be had. Our entry at 48.54 is noted in the
yellow highlighted areas and we exited on the yellow highlighted bar after
failing to take out 48.13
The other trade we were keen on was a long in
(
TXU |
Quote |
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PowerRating). A break above 98 would be a new 52-week high. While the market
was weak it was getting pretty oversold – we were willing to go long TXU
on a modest bounce in the S&Ps.
While the chart below may look as though
the two long entries denoted by the pink lines were good, they were quite meager
given that fills were a bit tough as thin conditions caused the specialist to
spread his market in and out. Also note, we refer to
the price of $80 in the chart, it is meant to read $98 (my mistake).
The one thing that is worth noting, however, is
that the TXU trade was done in the context of a weak market (see chart
below). These trades are statistically less “generous” than if they were done
in a strong market. As noted earlier, the oversold conditions in the market and
oversold conditions in the stocks that we had targeted as most technically sound
for shorts were simply not meeting our criteria for shorts, hence being buyers
of ‘strong’ stocks (high velocity and Fib gauge readings) was the better bet.
I ended up the morning with roughly .30 cents of
profits (1,000 shares) after all was said and done. Not a bad day, but one that
felt as though I was fighting an uphill battle.Â
As always, feel free to send me your comments and
questions.