Why I Don’t Trade Breakouts
On Thursday, the Nasdaq sold off hard in early trading.
Then after trading sideways throughout mid-day, it resumed its sell off in early
afternoon trading. It found its low during the last two hours and generally
worked its way higher for the remainder of the day. However, this wasn’t enough
to keep it from closing poorly. This action puts it back into its recent trading
range. Arrrrg!Â
The S&P put in a similar performance. This action keeps
it stuck in a trading range.Â
So what do we do? As you may know, breakouts
are prone to failure. This is why I’m not a breakout trader (not that there’s
anything wrong with that!). I’d much rather wait for a decisive move out of a
range and then look to get long on the first pullback. With that said,
Thursday’s action in the Nasdaq puts me back into “wait-and-see” mode.
Therefore, focus on those issues that can trade contra to the indices such as commodity related and defense stocks. One caveat though, most of these issues are getting
overbought so you might want to wait for the next pullback.Â
No setups tonight.Â
For More Information
As mentioned recently: If you’re new to momentum based swing trading and would
like more information (e.g. on the basics such as trend, entries, money
management etc…), email me and I’ll be happy to send you the primer section
from my second book.
Best of luck with your trading on Friday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. My new 20-hour course is now shipping.
Click here to learn
more, or to order..Â
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