Tuesday’s Action Suggests One Thing…
Getting A Head Start On A Swing Trade
As you likely know, when a stock gaps open, this area often
becomes the high (or near high) or low (or near low) for the day. This is due to
the fact that many are trying to rush in or out of the stock but that
demand/supply is quickly exhausted. The phenomenon can be quite useful.
Let’s follow up on Alcan Inccue Metal Group
(
AL |
Quote |
Chart |
News |
PowerRating),
mentioned recently. As discussed in Monday’s column (an audio/visual), the
stock gapped open to its exact high for the day. Nimble daytraders and swing
traders looking to get a head start on a trade can short near the open when the
stock begins to slide and then place a tight stop just above the opening range.
In this case, the stock moved move than one point before the
“official” swing trade entry (1) was hit (“entry” as defined in
my swing trading primer…email me if you need a copy). Fast forwarding to today,
the stock moves over another point in our favor (2), allowing for partial
profits to be taken (again, as defined in my primer) for those who entered
early.
I’ll follow up on the above and other examples during Wednesday’s
interactive presentation (see below).
On Tuesday, the Nasdaq drifted lower in the morning, worked
its way higher in early afternoon trading but then sold off hard late in the
day. This action has it stalling and reversing at overhead resistance.
The S&P sold off even harder. This action has it
reversing at its 50-day moving average and it puts it back below overhead resistance.
So what do we do? The fact that the market is
stalling at overhead resistance suggests that the Big Blue Arrows remain intact.
However, due to recent choppy action, I’m not seeing many worthwhile setups
outside of a few in a commodity related areas. Therefore, on the short side,
focus on these areas (e.g. metals & mining and energies).
As far as setups, Diamond Offshore
(
DO |
Quote |
Chart |
News |
PowerRating),
in energy, looks poised to resume its downtrend out of a pullback/big picture
top.
FYI
Tomorrow (Wednesday, April 11) at Noon eastern, I
will be doing my weekly interactive audio/visual presentation. I know I’ve said
this before, but this week I really do have some great examples–some that
worked and some that didn’t. So far, I plan on covering current market
conditions, staying with a wining trade longer-term, damage control, and
trading around earnings announcements. I also will continue on my recent theme of
how trading is a business of decisions; how to make them–and more importantly–how to live with them. If you would like to participate, email me for instructions.
Also, I have the past past 9-10 months archived (covering topics such as
scanning,
sector analysis, entries, money and position management, potential
opportunities, market timing etc….). Let me know if you would like those
too.
Best of luck with your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. Learn my newest and most advanced version of my Bow
Ties Strategy. Click
here for details.