Three Crucial Essentials For Trading Volatile Times Like These
On Thursday, the Nasdaq gapped higher and continued higher
for most of the morning. It then drifted lower and sideways for the rest of the
day. However, it still managed to hold on to the bulk of its gains. This action
has it closing well and, believe it or not, closing just above its 200-day
moving average (a).
The S&P also put in a solid day. It’s below its 200-day
moving average but could be there soon as higher numbers are replaced with lower
numbers (i.e., as the moving average “moves”).*
So what do we do? Yesterday (Wednesday) was a great
day. Coming into the day, there were quite a few sell signals triggering and the
market accommodated by dropping sharply. However, as fast as you can say
“this is easy,” the market shoots straight back up (on Thursday). I’m
not really sure what to make of the market at this juncture. However, I do have
some quotes literally written on my monitors that help me to get through these
tough times. Once of which is: “Believe in what you see and not in what you
believe.” That one stuck with me as I did my normal nightly routine of
tooling through hundreds of charts. So what am I seeing? I’m seeing stocks in
software, internet doing pretty darn good. Telecom (below) is actually forming a
high level “running” cup and handle. On the other hand, energies,
semis and biotech still seem to be lagging. Therefore, based on such mixed
signals, I think both sides could be played. However, based on recent
volatility, I see no reason to bet the farm.
Looking to potential setups, considering the above,
Sprint
(
FON |
Quote |
Chart |
News |
PowerRating) is in its first pullback since breaking out of a high-level
cup-like formation.
Three Crucial Essentials For Trading Volatile Times Like
These
Obviously, the lack of follow through makes it frustrating
for the momentum based swing trader. If you are to survive, there are three
things that you must practice:
They are 1) Money management, 2) money management and 3)
money management.
Best of luck with
your trading on Friday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
*This is know as the “drop off” effect.
Moving averages can rise (or drop) quickly as older numbers are “dropped
off” and newer data is added (i.e. the market was higher 200 days
ago).
“….Your idea about the MAs narrowing, crossing and setting up in proper order sure is a good one. It makes flipping through charts a piece of cake; another great idea from your marvelous book.
Grant C.
