Waiting For A Bounce To Play
As
usual,
the timing models have not changed especially after
such a horrendous week. We should see a bounce this week due to the
markets being quite a bit oversold.
The CBOE Volatility Index ($VIX.X)
traded up past the 35 level, which in the past had indicated that a
short term bottom was imminent. Because
the
S&P 500 breached its April lows, a recovery may take additional
time to come to fruition.
So what are
we to do? The same thing that we have been doing...trade
with caution and make sure we use protective stops on every trade.
If we get a bounce from the
markets,
look for momentum plays on the long side. Microchip Tech (MCHP)
is forming an ascending symmetrical triangle. Note if you do take any
trades in this market environment, make sure you don’t overstay your
welcome as the bounce could be short lived.
BISYS Group (BSYS)
is forming a handle to go along with its 6 plus week cup. The computer
services company is showing some decent earnings growth.
Extended Stay America (ESA)
is forming a handle to a multi-week cup. Note how the handle gapped up
and has not filled its gap, if price should gap above the high of the
handle, it could create what Mark Boucher calls a "Dynamite
Trading Range".
Remember that all securities
are risky. In any trade, you should always reduce your risk by
adjusting position size and placing open protective stops where
you will sell your long or cover your short in case the market turns
against you. For an introduction to combining price stops with
position sizing, see Loren’s lesson, Risky
Business.
Greg