Good evening StockBandits!
Monday’s minor bounce after a sharp selloff last week pointed to a sudden lack of interest on the part of dip buyers – the group which has been so responsible for the continuation of the market uptrend which started last March. Rather than stepping in to offer support, they were distinctly absent for a few days last week, presumably waiting for the selling to end. But once some green was seen on Monday, they failed to get involved, leaving the market with only slight gains across the board. That suggested the downward move might have more to go before a meaningful bounce is seen, as did yesterday’s inside bar after the trend move lower. Today, those were validated with another weak session.
At one point this morning, we did see a rally off the lows unfold in a squeeze-like manner, but the pullback which followed that was met with more buying and new highs. It looked like perhaps a relief bounce might finally be unfolding, but the strength stalled in the early afternoon and simply led to a rollover move which gave back the day’s gains. In the end, minor losses were posted, which is more of a psychological blow to the bulls than a technical one.
Clearly it’s still a market which can’t be trusted on the long side yet, but today’s lack of a major move in either direction does help to offer another bar for consolidation purposes on the daily charts of many stocks – something which is badly needed in the construction of new tradeable patterns. Shortened timeframes are still best heading into tomorrow, so stay sidelined if you’re not an intraday trader. At some point we’re going to see some good opportunities emerge, but they aren’t here yet after this one-way move.
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: IT, AMED, TIF, MA, OSG
Swing Trading Candidates:
NONE TONIGHT
Bullish Watch:
CFN, IT, AMED, SWSI
Bearish Watch:
SY, TIF, TUP, SWC, EBIX, CXW, MTW, MA, ROK, WLL, OSG
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.
Jeff,
I’m struggling with executing day trades. For example, today I executed 2 day trades – TIF and OSG (per your suggested triggers).
TIF – I sold at 41.05 with a target of 40.15 and a stop of 41.36.
OSG – I sold at $45.45 with a target of 44.55 and a stop of $45.77
Stops were based on risk tolerance of .30 for 1,000 shares and targets were based on risk ratio of 3 to 1 (i.e. if I’m willing to risk .30 I want to make .90)
I have a few questions based on the above.
1. Was my thought process for setting targets & stops reasonable?
2. Should I have taken a look at the charts and set stops/targets based on some timeframe of the charts (and reduced or increased shares based on max loss of $300)?
3. If the answer to #2 is yes, what timeframes & other information should I have been looking at?
4. Did you play those names today & if so what did you do differently?
thanks!
Chuck
Hey Chuck!
First of all, today was not an easy day to trade. Lots of back and forth as the market was trying to grind out a tradable low for the 4th straight day. Anytime that’s the case, there are going to be some shakeout moves. I found that to be the case today as well, so you are not alone.
TIF triggered and began to work, but couldn’t make much progress before bouncing. The mid-morning bounce took me out for a 1% loss, before turning back down shortly after. Frustrating. Your .30 stop just saved you money, but I saw no chart-based spot to adjust my stop to, particularly given that it got only slightly in the money (less than 1%) before bouncing.
OSG fared a little better, staying within the 1% parameter I had set on the first bounce after triggering (lunchtime), then took out the morning low. I took off 1/2 mid-afternoon for .25 when it looked like the market wasn’t going to sell off post-FOMC, and adjusted my stop to breakeven on the rest, which was soon after hit. Small gain, but indecisive action always requires more effort for less payout.
I like to use 1% as my initial stops, and look to set my risk/reward from there. That was $0.40-45 on each of these, which is sufficient to see if they’re going to go. In your case, .30 was not a mistake I don’t think, but it is pretty tight. Not unreasonable though, and yes I believe each of these could have cracked and hit the targets you had set out. The indecisive moves and the lack of follow through on the breakdowns was the issue here though, not your placement of stops (in my opinion).
I watch 3-minute candles on the intraday charts, which prevents me from reacting to every single tick but still keeps the chart moving and alerts me to things like higher or lower relative highs/lows. That’s what’s most important to me, whether it’s a 3-minute chart or a 5-minute, I can live with either one.
Hope this helps, and if I can clarify better please let me know and I’ll give it another shot!
Makes perfect sense as usual – thanks!