Look To Get Short After This Occurs
On Thursday, the Nasdaq gapped lower and began to chop
around. It rallied late in the morning but found its high and sold off for the
remainder of the day. This action has it closing poorly, breaks it down out of
its recent trading range, and it puts it well below its 50-day & 200-day moving averages.
The S&P put in a similar performance. Â
So what do we do? The fact that the indices
resumed their slide from an oversold condition suggests that there is some
serious selling out there. However, based on this oversold nature (and since my
methodology requires a pullback), I’d wait for a bounce before looking to get
short. For now, start putting together your list. Areas breaking down from
high levels such as Internet and selected retail could offer more opportunities
than those areas breaking down to new lows (the higher they are, the further
they have to fall). On the long side, continue to focus on those areas that can
trade independently of the indices. Defense and metals & mining are two
areas that come to mind here. You might hold off on the energies for now
since they appear to be correcting from overbought (e.g. recently mentioned
issues BR, EOG, and VLO all finished lower after trading higher).Â
No setups tonight.Â
Best of luck with your trading on Friday!
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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