Good evening StockBandits!
Stocks gapped slightly lower this morning, but not enough to really produce the washout-type of exhaustion move this market seems to need. We spent the first few hours of the day range-bound but in negative territory, but right on cue we saw early afternoon weakness produce more downside follow through, and the market closed just a short distance from its lows on the day.
We’ve seen plenty of streaks before, with rallies and selloffs lasting anywhere from 5-9 straight sessions at times. While it’s fine for the media to fixate on them when they do arrive, what we have to do as traders is stay on our toes and watch for a turnaround to begin – and it will. That’s not to say that it will be a lasting reversal, but simply one which is likely to be worth trading. I say that because the initial part of it at least is going to involve bulls putting cash to work as well as bears rushing to cover shorts into weakness before seeing profits evaporate.
So, the proverbial rubber band is getting rather stretched, and with each passing day the odds for a turn increase dramatically. We’re through key levels and there’s still plenty of room to slide further – anything’s possible – but the odds for even a dead-cat bounce are getting high after this relentless pressure of the past 6 sessions.
Rather than step out in front of the slide in hopes of catching a turn, the best approach here is to wait for one of a couple things to occur. One would be an exhaustion gap. That would be a spooky kind of gap where it brings capitulation-type selling by the remaining holdout bulls. They’ve endured pain, but on another wave of pressure they finally spit the bit and capitulate. Another would be the creation of a higher low and higher high on the intraday chart. Whether referring to the futures (ES or NQ) or SPY/QQQ, at some point we’ll see the tide start to shift with the creation of a higher relative low. So watch for a bounce followed by a shallow pullback to indicate that.
Personally, I’m unwilling to short anything here and tomorrow will be focused on just a few names. I’ll cover individual stocks in the video down below, but I’ll of course be involved in the major ETF’s should either of the above scenarios come into play, using a 1% stop to allow for a little wiggle room while still staying disciplined. And we may slide further again tomorrow, that’s not out of the question, but right here I’m intent on trading the long side once conditions are suitable for a shot at buying.
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: MON, OC, MPEL, CLR
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.
