Bandit Broadcast for 5-4-2010

Good evening StockBandits!

The major averages started off this morning on the wrong foot, slipping early to fall back toward the lower end of their 3-week trading ranges, only to undercut key short-term support zones by mid-day. Unable to recover, they simply lingered near their lows for the rest of the session, finishing not far from their worst levels. The point losses were the biggest seen since February 4th, one day before the most recent upside run began.

The most important event of the day was the fact that each of the indexes closed beneath support zones. That translates into a downside resolution from the high-level trading ranges, and along with the added recent volatility, suggests that a change of character may be underway. Turning points tend to more often be a process rather than an event, and the past few weeks have seen no follow through in either direction. There have been solid rallies followed by downside reversals, and vice-versa – all of which point to some increasing indecision of late. I’ve noted my reasons for caution here for the past week, and today’s move validates them.

I’ve also mentioned here that if the market is in the process of a turnaround, there will be plenty of time to get on board for trading the short side – that the initial move doesn’t have to be caught. I still feel that way, and now I’ll be watching for some failing rallies to short sell. In the coming days, I suspect we’ll see some bounce attempts which aren’t able to reclaim key levels, or which are accompanied by poor upside volume, and those will be clues that those stocks are the ones to focus short-selling efforts on.

I will say I’m very glad to be in cash for the past several days, not only with the lack of follow through but with today’s breakdown. If you haven’t raised cash already, this is a good time to consider doing so. It isn’t too late, because if the market corrects further from here, significant profits can be given back with ease.

By the way, I’m doing some travel the next couple of days but will return to the video format later this week. For tonight, my notes are on the charts below for index levels and potential trades I’m eyeing for Wednesday.

Please leave your comments and/or questions below if you have any, I always enjoy the interaction.

Chart courtesy of StockFinder

Swing Trading Candidates:

I’m eyeing the following setups for multi-day plays if they can cross the levels specified here. The Hit List post outlines my trade parameters for these plays, including entries, stops, and targets.

Chart courtesy of StockFinder

Day Trading Candidates:

These are the trades I’m eyeing for potential plays on Tuesday. I will not be holding these overnight, and will wait for these levels to be crossed before entering trades.