Good evening StockBandits!
Friday morning brought with it an exhaustion gap to the downside after relentless selling on Thursday (and 4 of the previous 5 sessions), and along with it came a test of the May lows. The indexes reversed sharply, closing the gap entirely and finishing positive by more than 1% across the board.
Whether it was buyers who chose to defend the lows, or shorts who sensed an excellent opportunity to cover isn’t clear. Nor does it matter. What happened was a validation of the lows and a big initial surge higher away from them. That gives us a key zone to focus on going forward – at least until the May lows are taken out.
Thursday night’s DIA scenario outlined here got to within $0.02 of the $99 level I mentioned, and promptly ramped nearly 3 points higher. That trade made my week, and I hope you were able to participate in it as well. There were a number of other big rebounds, but my focus on Friday was the ETF’s since I knew they would participate in a rally (plus they can be traded in size).
The big question now is “was that the end of the selling?” Honestly, I don’t have an answer for that one…no crystal ball here. What I do know is that stocks were deeply oversold enough, that paired with the high emotions, the path of least resistance suddenly shifted. This market has been very reversal-prone in recent weeks, which means we could turn right back around and break the lows, or the bounce could continue for a little while. Anything is possible, particularly in the current environment.
I also know that when it comes to quality patterns in the charts to trade from tonight, there are virtually none. The downdraft last week broke every bullish and bearish chart apart. In terms of consolidations or bases, there are next to none at the moment. That will change, but right now they’re absent due to the frequent wide-ranging days of late. It’s a time to keep very brief timeframes for new trades, or to stay on the sidelines until better setups emerge. Emotions are running high, which means overreactive moves can occur at any time.
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: OIS, UHS, AIG, HOT, ITRI, BIIB
Swing Trading Candidates:
NONE TONIGHT
Bullish Watch:
CSTR, OIS, UHS, ITRI, AIG, TEX, HOT, GIL
Bearish Watch:
BIIB
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.
