On The Verge Of Breaking
Good
morning. Lower again in the
pre-market with the S&Ps trading just below a 50% retracement level, 1222. This
level should remain pivotal. Support is
seen at 1209 with upside resistance at 1227. The
NASDAQ is in worse shape, as it cannot manage a close above the 50% retracement
level of 1759 and is on the verge of breaking critical support at 1674.
Further support is seen at 1656. As
long as the earnings warning continue, it is difficult to see an end to this
drift lower.
Given the continued trashing of
some of the tech stocks, drug and consumer staples have been the beneficiaries.
One stock to keep an eye on is Merck
(
MRK |
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Chart |
News |
PowerRating); a break above 74.84 would
be bullish. (See chart below.)
The Drug Index
(
DRG |
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Chart |
News |
PowerRating) also displays a similar pattern.
It does not matter how long you
have been trading, slow periods in the market inevitably lead to anxious moments
when the market lures you in, only to close the door.
The Oracle
(
ORCL |
Quote |
Chart |
News |
PowerRating) news on Monday evening led me to believe that the
market may be pretty strong on Tuesday. The market did open higher, but
immediately traded lower throughout the morning.
What will it take to get the market going?
That is anyone’s guess. What is
obvious is that as a very short-term trader, you do not want to develop too much
of an opinion of what may happen when the market opens; it only clouds your
judgment as things unfold. A better
approach is to simply be aware of different support/resistance levels in the
futures and the stocks you are trading, everything else is simply a guess.
I want to share with you a
trade that got the better of me, forcing me to work like a dog the rest of the
day just to get marginally profitable. Remember,
the name of the game is “Put the probabilities in your favor!â€
Let the analysts give the opinions.
Since I was incorrectly in the
mindset of the market being strong, I jumped all over a trade on EMC Corp
(
EMC |
Quote |
Chart |
News |
PowerRating),
picking up 1000 shares at 29.60 (Point A). At
the time I thought it was an OK trade, the S&Ps were gathering steam and
heading above the opening high. What I
forgot is that gap-up openings rarely result in a continuation, at least
initially. Being in the mindset of
thinking the market would go higher cost me .60, $600, as EMC gapped down.
(At least I did not buy the high, 29.62) Not
the way I wanted to start my day. Going
back to the basics and being patient put me right back on track, and I had only
one losing trade after that.
While this scenario can happen
to even the most seasoned traders, beginners are especially vulnerable.
The market has a wonderful way of playing with your emotions, fear and
greed. Bottom line — stick to your game
plan.
Until tomorrow…trade
selectively and stick to your plan!