Here’s A Pattern That Might Just Help You Catch A Top In A Stock
Dave Landry is principal of Sentive Trading, a money management firm, and a
principal of Harvest Capital Management. Mr. Landry is the author of two top
selling books,
>Dave Landry’s 10 Best Swing Trader Patterns And Strategies and
>Dave Landry On Swing Trading.
If you would like a free trial to Dave’s Nightly Swing Trading Alerts Report
at=st”>click here or call 888-484-8220 ext. 1
The Gatekeeper
Over the past few years, I have become friends with Fibonacci expert Derrik
Hobbs. When we are not talking about guy stuff, we occasionally get around to
looking at charts. One thing that we observed is that deep pullbacks/sharp sell
offs often have one last run towards their old highs before eventually topping.
Upon further observation, we noticed that markets often stall out right at their
.786 retracement level (of the correction). Derrik explained to me that this
retracement is the “Gatekeeper.” If it breaks through it, the market
often goes to new highs and beyond. However, the real opportunity lies in the
fact that markets can often form a top at these levels (see below for an
example).
I realize this concept is a little new to those are are more familiar with my
“Trend Following Moron” style. Therefore, I will explain it further in
Wednesday’s audio/visual interactive presentation (see below for
details). Â
On Tuesday, the Nasdaq opened slightly
firmer but quickly reversed and began to sell off. It found its low by mid-day
and then began to rally. However, the selling resumed going into the close. This
action puts it right at its 50-day moving average. Â
The S&P put in a similar performance. This action
puts it below its 50-day moving
average.Â
So what do we do? Nothing much has
changed. The market remains choppy on both a daily and intra-day basis.
What’s worse is that it has generally worked its way lower as of late. The
sector action pretty much mirrors the major averages. Most have either formed
tops or at best, have lost momentum. Considering this, I see no reason to take
any action on the long side. On the short side, manage existing positions (trail
and scale) in areas that have recently broken down such as the homebuilders,
REITS, and retail. Energy and now metals & mining appear to be in the early
phases of forming tops. Therefore, aggressive traders might want to watch for transitional
patterns (early trend) in theses areas.Â
As far as setups, Suncor Energy
(
SU |
Quote |
Chart |
News |
PowerRating),
in the energies, looks like it has the potential to continue lower out of a
Gatekeeper (email me if you need the rules). Â
FYI
On Wednesday at 11:00 A.M. Eastern, I will
be doing my weekly audio/visual interactive presentation. In addition to the
Gatekeeper pattern, I’ll be covering current market conditions, where I’m seeing
opportunities, and anything else that you would like me to cover. Email me if you’d like a free link to
participate and/or the links for the
12 months (covering entries, stops,
position management, damage control, scanning, sector analysis etc…).Â
Admission is free but the numbers are limited by the software. So, sign in
early! Â
Best of luck with your trading on
Wednesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. Learn my newest and most advanced version of my Bow
Ties Strategy. Click
here for details.