Good evening StockBandits!
Option expiration Friday is often dubbed a volatile day, but rarely does it end up playing out that way. Last week we saw an exception to that though, as the indexes took the most significant tumble since the first week of February. While it’s true that’s not saying a whole lot given the one-way nature of the price action since then, but it caught many traders off guard.
It’s been easy to get lulled to sleep in this market over the past couple of months, as the overconfidence of the buyers had left volatility readings at their lowest levels since July 2007. It seemed as though stocks may never go down again – even for a day – to some traders. Fortunately, we know better than that, and Friday’s decline was important for a couple of reasons.
First, the shift of direction (even if it ends up being short-lived) will help to shake up many charts. That’s a needed thing in a sea of stocks which have just been climbing steadily for so many weeks. It should mix up things a bit, and help to create some new bases and perhaps even some lasting reversals in some stocks.
Second, Friday’s action serves as an important reminder that there is risk always present in the market. For those who had forgotten, they now recall that stocks can and will go down sometimes.
Hopefully you didn’t suffer much damage in the selloff, and maybe you were able to offset any long-sided declines with some shorts in stocks like Thursday night’s MEE. Time will tell if this will mark an important turning point, so I’m in no hurry to make any predictions.
Now is a time to exercise some caution with how quickly to rush in and buy this dip, because it might not be over yet. It’s also a time to exercise some patience in letting some new setups come along. We’ve seen quite a few in recent weeks, but it may be a few days that we’ll need to primarily sit on our hands while we wait for some technical clarity. The steady up move followed by an abrupt drop leaves very few stocks with constructive patterns, so keep that in mind as we head into a brand new week of trading. Protect capital, and be willing to wait for the best situations to arise before putting on more risk.
Please leave your comments and/or questions below if you have any, I always enjoy the interaction.
Here is tonight’s video:
The Bandit Broadcast Video – Click to Watch!
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Video Stocks Discussed: GS, YGE, STP, IVN, FCX, WLT, CBI, LPX, DV, JCP, GDP
Swing Trading Candidates:
NONE TONIGHT
Bullish Watch:
PDCO, CREE, CDNS, WMS, NFLX, NOG, FFIV, APOL, LPX, DV
Bearish Watch:
JCP, LLEN, CAG, CF, CLF, NTES, GDP, MAA
The Hit List will be coming out soon with discussion on open positions and swing trade stops and targets, so be sure to watch for it.
