Let The Dust Settle
Each evening we focus
on the most interesting aspects for the upcoming trading
day. The comments are based on observations of the nightly
updates of the Stocks/Sectors and Market Bias pages. They
are provided for educational purposes only and are not
intended to be direct trading advice. Also, keep in mind
that these remarks are made up to 12 hours in advance of the
markets opening. Therefore, overnight events may alter the
outcome of these observations.
On
Friday, the Nasdaq gapped lower on the open (a) based on Thursday night’s bad
earnings announcements/news and Friday morning’s higher-than-expected PPI report. ItÂ
traded
lower for most of the day but climbed from its low late in the
day.
I suppose the
good news is that the 2400-ish, Thursday low (b), held. If the market can
continue to hold above these levels, there is the potential for a big picture
double bottom to form. If these levels fail to hold, then a trip to the old
lows, and possibly a stab below, is in the cards.
So what do we do? This is one
of those damned if you and damned if you don’t situations. If you sell short
this oversold market, then we’ll get a bounce from oversold. If you buy, then
oversold will become more oversold. Therefore, I think I’m going to sit this one
out and let the dust settle.
Should you decide to trade,
Insight Communications
(
ICCI |
Quote |
Chart |
News |
PowerRating) on the Pullbacks
Off Highs List, looks like it has the potential to resume its uptrend after
its recent breakout from a high-level wide-and-loose base.
Precision Drilling
(
PDS |
Quote |
Chart |
News |
PowerRating), also on
the Pullbacks
Off Highs List, looks like it has the potential to resume its uptrend from a
pullback from all-time highs.
It seems that as the bear market grinds on, I continue to
get more and more emails from the intermediate-term trader looking to crossover
into swing trading. I say welcome!–provided of course you are doing it for the right
reasons. If you have recognized the fact that the majority of a market’s moves
occur in the minority of time and you are looking to capture sizable moves
without the risk of longer-term market exposure, then swing trading may be for
you. However, if you are simply looking for action after months and months of
sitting on cash, then you shouldn’t change styles.
No matter what your reasoning, you should recognize that
its not easy to change trading styles quickly. It’s not that mechanics are hard
to learn, it’s the psychological impact of trading in a style outside of what
you have grown accustomed to. Therefore, ease into it, study the methods, and
remember that trading outside your belief system takes time.
One last point, there has been very little follow through
lately. In this choppy environment, money management is crucial. Therefore,
swing trading (or any style of trading for that matter) without protective stops, locking in profits quickly, and trailing
stops
will not be profitable. So, spend as much time learning
the money management as you do the patterns and setups.
Best
of luck with your trading on Tuesday!
P.S. Reminder:
Protective stops on every trade!
Enjoy you weekend and market holiday!
“….very
clear, concise and easy to work with…..”
Mark F.
No risk, 30-day, money
back guarantee.