Good evening StockBandits!
Following 5 straight weeks of declines, many were looking for a market rebound last week. Technically, we had seen support levels coming into view which could produce a bounce (NAZ 2705, S&P 500 1294). Instead, they were undercut and left in the rearview mirror while the market headed south for the 6th consecutive week.
Psychologically, the traders’ mindset of fading streaks was acted on by some in hopes that oversold conditions would revert to the mean. The action proved to be mean alright, but not in the way those bulls had hoped. What we saw was more downside pressure until a dead-cat bounce arrived on Thursday. Even then, a poor finish tainted the rally, indicating that it was not to be trusted.
Friday’s hard selloff put an exclamation point on the week for the bears, as Thursday’s gains were quickly erased and much more. In the end, the NAZ finished more than 3% lower (S&P down over 2% on the week), ending at levels not seen since mid-March.
The hardest part of this selloff is figuring out what to trade. Virtually anything which had a bearish pattern in recent weeks has long since left the station and has felt like a chase. By the same token, very few stocks have been able to maintain a bullish posture at all with all the market pressure, which leaves the watch lists understandably sparse. The market is still oversold, so we should be on watch for a bounce, but we have yet to see a decent bounce kick in.
The bottom line here is that market corrections aren’t easy. If a shift to cash (as I’ve noted here numerous times of late) was made, plenty of pain was avoided by you. If you’ve been caught on the wrong side and stayed wrong, then the market is teaching you a lesson you won’t soon forget. And if you’re itching to make some trades, it may be best to wait just a bit longer. We’re going to have some excellent opportunities in front of us, but we need to let this storm blow over first. In the meantime, shortened timeframes are still best for those interested in participating.
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: VHC, GPOR, WLK, NTES, OPEN
Swing Trading Candidates:
NONE TONIGHT
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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.
