Why I’m Not Playing The Bounce

On Wednesday, the Nasdaq chopped back and forth but did
manage to close well and in the plus column.

This action keeps it in a trading range. The top of the
trading range, which also corresponds with its 50-day moving average (and
soon-to-be 200-day moving average), could provide resistance.

The S&P was also choppy but performed better than the

This action also keeps it in a trading range. The top of
its trading range here is a focus area for resistance too.

So what do we do? The fact that the indices failed to
break out of their trading range combined with a TRIN Reversal buy signal (as
usual, email me if you need the rules) suggests that we could be in bounce mode.
However, I see no reason to play it. The longer-term trend still remains down
and the news continues to be mostly negative. Further, although many sectors
have traded sideways as of late (like the indices), most still remain in strong
downtrends. Therefore, I see no reason to change the game plan: Continue to keep it light due to recent choppy action and the
fact that we remain in fickle news driven environment. On the long side, stick
with selected areas of energy (e.g., independent oil & gas) since they can trade contra to the overall market.
And, once again, continue to use the news to your advantage: On the rallies, look for potential candidates to short.
On the sell offs, look to lock in profits and tighten stops on existing shorts.

No setups tonight.

Best of luck with your trading on Thursday!

Dave Landry


P.S. Reminder: Protective stops on
every trade!

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