New to trend trading? Read this
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
click here or call 888-484-8220 ext.
1.
If You Are New To This Column, Read This
Judging from my emails, it appears that there are some new
readers to this column. WELCOME! (If you are a
longer-term reader, you might want to skip or skim the next few paragraphs).
Therefore, I thought now would be good time to (re) explain my approach.
My
style is momentum based swing trading. I look for patterns that
have the potential for short-term gains with the potential of becoming a
longer-term winner. I believe one of the truest stock markets adages is
“the trend is your friend”. However, this doesn’t mean that I buy or sell short a stock just because it’s trending. You’re better off waiting
for a correction and then some sort of sign that the trend is resuming. Said
another way, I look for mostly for pullbacks (and pullback related patterns) and
an entry. Setups don’t exist in a vacuum though. Since a rising tide tends
to lift all boats, the sector action and market itself should also agree with
the stock’s trend. Finally, I realize that all of these concepts are
worthless without proper money and position management. This includes using
protective stops, trailing stops and taking partial profits.
This column reflects the “top down” approach
described above. I first look at what occurred in the trading day in the
indices. I compare this with short-term support/resistance and the longer-term
trend. I also will usually point out if any of my patterns or market timing
systems are triggering at this point. Sector action, when applicable, is
discussed next. I then discuss a general game plan based on what I’m seeing in
terms of market action, sector action and the setups I’m seeing in the stocks
themselves. Finally, I usually show one or two (or none depending on the
conditions) stocks which reflect the above
analysis. Also, on occasion, I’ll show money management and position management
learning examples based on stocks mentioned recently in this column.
Here at TradingMarkets.com, I have numerous articles and
column archives, several forums, two books, and CD ROMs that describe in detail all
of the above. Check them out! I also have a free primer and free A/V
lessons that describe much of
the above (email me if you would like a copy). Finally, if you need help, ask! I personally answer each and every one
of my emails (eventually!).
Sincerely,
Dave Landry
On Friiday, the Nasdaq sold off in the morning, found its low
around mid-day, and then generally traded sideways for the remainder of the
day. This action puts the Nasdaq at new lows for the year.
The Ps put in a similar performance but did manage to close off their lows a
bit.
So what do we do?
All three major market indices have
given up all of their 06/29/06 rally–and then some. This is why I constantly
preach waiting for follow through. As you can see, yet again, this would
have kept you out of trouble. Okay, enough preaching. About the only good thing
I can gleam from this market is the fact that the S&P found support near its
old lows. However, that in and of itself isn’t much to write home about. All
indices are now very oversold. Keep in mind that this does not mean that they
will bounce. As you know, oversold can often become very oversold–especially if
you try to catch a bottom. I think the best course of action is to wait for the
market to bounce and then look to get short. Said alternatively, look to play
the next pullback. Weak areas such as retail and technology in general could
provide the best opportunities.
No setups tonight.
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. If you would like a free
trial to my trading service, click
here.