Good evening StockBandits!
Did anyone else miss the 70-point NAZ gaps? If so, they’re back! Today we saw the market ramp higher on news of central banks coming to the aid of Europe, adding to Monday’s jolt to leave the indexes a long way from last Friday’s closing levels. That gives the DJIA a 3-day lift of more than 800 points, while the NAZ, RUT, and S&P 500 each erased the bulk of their November losses. It’s been impressive to watch.
And yet, it’s been nearly impossible to trade. To have captured this move would have required getting long last Friday into an incredibly poor finish on the heels of important breaks of recent support. Technically, that’s anything but a bullish setup, so if you’re beating yourself up over missing the move, you’re not alone. Clearly there were quite a few who missed it, hence the big lift as traders rushed to put cash to work even if it meant chasing an extension in price.
Throwing caution to the wind would have paid nicely over the past few days, but I’ll venture to remind you that it’s not a good strategy to employ if you’re hoping to stick around as a trader. The market just has a way of punishing those who chase big moves. Remember last week’s losing streak? Anyone shorting after a few down days started to get paid, but then took it on the chin with Monday’s gap higher. The same lesson applies here in that it’s a tough spot to be adding long-sided exposure after a move of this magnitude, generally speaking. I’m eyeing some longs for tomorrow, but two are only for day trades and the swing candidate isn’t at all extended like this market currently is, so it’s all in context.
On the bright side, it appears we’ll get our higher low after all. The further we lift from last week’s lows, the better the odds become that it sticks, thus creating the higher low vs. the October low. Going forward, that’s bullish for the intermediate term. We’ll still have some levels of overhead to contend with, but the foundation has been poured for some lasting strength. The bulls will just have to produce it now that the technicals are in their favor.
In terms of today’s action, these giant gaps are among the hardest days to trade. Setups which were ripe for moves get skipped over by way of the gap, and it leaves you looking at a huge market move and feeling left behind. The urge to chase and “just do something” is there, but typically that results in lower standards and trades which fall outside your game plan. If you resisted that urge today, pat yourself on the back. As I’ve noted lately, if this higher low plays out and we start to see some lasting upside, it’ll offer multiple opportunities to get on board. With that said, it’s important we remember to stick with the quality setups and stay methodical instead of abandoning discipline out of fear that stocks will never again pull back.
I’ll cover my game plan for tomorrow in the video, and as always, feel free to share your own thoughts, trade ideas, and questions down below in the comments section.
Here is tonight’s video:
The Bandit Broadcast Video – Click to Watch!
Video Stocks Discussed: CFX, DVA, WTW, TSLA
Swing Trading Candidates:
TSLA has held up very well of late, ignoring the market pullback to simply put in some lateral rest with the formation of this symmetrical triangle pattern. Short-term, this one isn’t at all extended so it could quite conceivably play catch-up to the overall market. I’ll be going long for a swing trade if this one clears the upper trend line with a push through $33.00. As with all swing trades, my stop and target levels for this stock are on the Hit List here inside the Hideout.
The Hit List is a separate post which contains discussion on open positions and swing trade stops and targets, so be sure to check it for further details on swing trades.
