Good evening StockBandits!
Stocks got slammed today as traders had little else to focus on aside from disappointing economic data and the ever-present debt ceiling debate in Washington. As the August 2nd deadline approaches, the price action shows a clear picture of buyers being replaced with short-sellers and profit-takers.
Although we’re likely to see a quick rebound in the market once this uncertainty passes, the fact of the matter is that right now it still looms large and the market clearly doesn’t like it. Trying to trade the short side aggressively for any timeframe outside a few minutes or hours opens the door for increased headline risk, as a resolution to this mess will eventually deliver a sharp bounce. At the same time, attempting to buy into the weakness could result in simply entering too soon, as another couple of days like today would require a sizeable rally just to return to current levels.
To say the least, it’s a mess out there and there’s little to do until it’s resolved, other than scalping some intraday moves. The biggest factor right now is patience for navigating this market. Rather than forcing entries in an attempt to be involved in some way, the best traders are willing to sit on their hands and let the setups build. We’re still caught in a multi-month trading range, we’re facing a volatile, headline-sensitive environment right now, and there are very few setups worth noting.
My plan is to let this corrective price action run its course, then reassess where the market stands. Should it find support at a level above the June lows, that would mark a potential higher low and offer up some potential for a push back up toward the upper portion of the range. However, the jury is still out on that as stocks continue their slide from last week’s highs.
I’m still in cash tonight, and quite content about it. Getting stopped out of my long swings a few days ago by aggressively raising stops allowed me to lock in some solid gains and avoid all this pain. I’ll continue to monitor my watch lists for potential swings, but at the moment the market is still so fixated on the news flow that it’s not allowing stocks to create the consolidations and basing action needed for new swing setups.
This will at some point come to pass, but for the time being we have to respect it and I think cash is a great place to be at the moment given all the uncertainty this market is facing. Stay patient out there, because we will see some good opportunities emerge from all of this.
Tonight I’m going with the written format as I know some of you enjoy being able to skim the setups. My notes and trade levels are provided on the charts below.
Please leave your comments and/or questions below if you have any, I always enjoy the interaction.
Swing Trading Candidates:
NONE TONIGHT
Day Trading Candidates:
These are the trades I’m eyeing for potential plays tomorrow. I will not be holding these overnight, and will wait for these levels to be crossed before entering trades. Please see the Day Trading Strategy for more details on how I manage these trades.
[table “94” not found /]
The Hit List will not be posted tonight as I am 100% cash overnight and there are no new swing trades for Tuesday. The Hit List typically contains stop and target levels for my swing trades.
Hey Jeff,
I have been watching the QQQ’s the last couple of weeks and made a purely speculative move on my part that’s working out at the moment.
Last week I started buying QID. Scaling in between 46.50 to the low of around 45.50. After yesterday’s drop in the NAZ I have tightened my stops in QID for good gains. 1st target at the top of the window at with resistance at 48.90. If the NAZ market breaks the July support of 2743, we’re potentially looking at the June support area around 2600. If so, a lot more room for QID to move to the upside. Other than QID I’m all cash at the moment.
If the NAZ continues lower, QID may be something for you to look at, let me know what you think.
Leonard
Hey Leonard,
That’s not a bad way to do it, just fading the moves via ETF’s. I think so long as you’re designating a game plan on the front end to add to the position up to a certain amount, the scale-in approach can be good. What you want to avoid is adding to a trade just because the entry wasn’t good. Doesn’t sound at all like that’s what you’ve done, so I say good job.
One last thought on this regarding levered ETF’s is the fact that they ‘drift,’ so you want to keep holding periods with them as brief as possible. The more levered the ETF, the worse the effect. You can learn more about this via Google for ‘levered ETF decay’ or ‘levered ETF drift’ and there are lots of examples of how time works against you in those products.
Keep up the good trading and thanks for sharing your recent strategy here, I like this kind of interaction. Go get ’em today!
Jeff,
Thank you for your insight, I’ll check out the “Levered ETF drift”.
Considering all the crazy news and the volatility of Tech earnings, I knew I wouldn’t be in this trade more than a day or two.
I went with an option play. I scaled into QID buying up to 10 contracts of the Sept 11 44 Calls. I exited the trade this morning when I tightened my stop using contingent order that triggered at 48. My net gain was 33% 🙂
All cash now.
Waiting to see what happens next week.
Still very busy at work, hard to trade in this market if I’m not right there to manage my risk. Looking forward to some more swing trade opportunities. I will also keep and study your Position prospects on my watch list.
If you don’t hear from me before then, have a great vacation.
Leonard
Leonard, good to know you intended from the start to keep the trade short-term, I think that’s the only way to do it with the levered ETF’s. And btw, nice work!
Wild morning already today, just another example of how skittish/responsive this market is with this debt ceiling news flow. Will be nice to have it behind us soon.
Thanks and I will have a weekend update for Monday’s session. Enjoy your Friday!