Good evening StockBandits!
The market gapped lower this morning following a disappointing earnings release from Alcoa, the first big name to report, as well as news that Japan was raising its nuclear threat level to 7 – the highest level and one which corresponds to the Chernobyl accident of 1986. After an initial bounce attempt (which failed to fill the gap), stocks headed south until late-morning when they finally stabilized. And although the indexes were able to lift slightly from their worst levels, they still shed about 1% on the day.
The recent quiet activity we’ve seen in the indexes carved out a short-term trading range, but today’s acceleration lower shows the market is now in pullback mode. To change the status of the current environment isn’t such a bad thing, particularly since lately traders have been reluctant to embrace another push higher before seeing a pullback. This dip will help to shake out some weak holders and may invite some buyers into the picture at lower prices. At the very least, the market has a good shot at producing a higher low on this pullback, which should encourage the bulls.
While we let the slide play out, it’s important to keep in mind a couple things. First, buying dips is best done once prices stabilize and a perceived pivot has emerged. Stated otherwise, don’t try to catch the proverbial falling knife by simply buying because prices are lower than they were. Taking a methodical approach means limiting risk, so watch prior resistance and support zones which could now serve as pivot areas for stocks. Second, patience is absolutely critical here. We’ve not seen much downside in this market over the past couple of years, so those who have bought on pullbacks have been paid handsomely each time they’ve done it. Regardless, respecting the increasing rate of this dip will help to prevent premature entries, so be willing to sit on your hands until some clear patterns emerge.
Earnings season is officially underway, but it won’t really kick into high gear until the last week of April. I can’t stress enough the importance of keeping a close eye on the calendars to avoid any surprises with overnights.
The market is still showing plenty of indecision at the moment, leaving many stocks still stuck inside of bases which are building. Until that changes, despite my desire to be taking more swing trades, I’ll be staying selective tomorrow and sticking to day trades when it comes to new plays.
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!
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Video Stocks Discussed: COF, DKS, OCR, DFS, FOSL, DVA, ANF, HD, WNR, HUM, QLIK, DAR
Swing Trading Candidates:
NONE TONIGHT
[table “23” not found /]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.
