Good evening StockBandits!
Last week we saw a continuation to new correction lows on Monday and Tuesday morning as selling pressure took its toll on the market. Finally, the rubber band had become so stretched to the downside that a snapback rally then followed with a huge run higher to finish the day on Tuesday. It was completely given back on Wednesday, however, providing a quick test of short-term support. The market was then able to bounce on Thursday and Friday, putting some distance between current prices and the lows.
At this point, it’s difficult to determine whether this is simply a dead-cat bounce from deeply oversold conditions, or if it’s actually a relief rally getting underway. We’ve seen tremendous volatility as fear and indecision leave traders rushing for the exits, then back into stocks, which made for a very wild week of trading. The bulls have much more to prove before they’re out of the woods, so the coming days and weeks are sure to be interesting.
Aside from the indexes, individual stocks have suffered as well with some huge straight-down moves having taken place. Since then, some names have seen incremental lifts, but bases and patterns simply aren’t very prevalent right now in the charts.
The biggest key for this market is going to be the next selloff. If it’s met with buyers at or near the lows of last week, then the market has a shot at stabilizing and starting a recovery of some kind. However, if we see the lows get taken out on a closing basis, it will be our indication that more downside pressure is on the way.
It’s been quite an emotional move thus far, making it both difficult and irrelevant to determine stopping points on the way down. Prior support levels have been completely ignored as traders sell first and ask questions later, so if we start to see downside follow through selling, it will again be a guessing game for when and where it stops.
We’ve been in cash here since July 25th, which was the first day down in a string of 7 straight declines for the S&P 500 which jumpstarted this selloff. Needless to say, that has not only prevented pain these past few weeks, but it has also provided us with opportunity, available capital, and a clear head going forward. It’s impossible to put a price tag on that as a trader, knowing so many have suffered both capital and confidence losses throughout this mess.
As more setups emerge in the charts and this volatility contracts a bit, I’ll of course be looking to initiate some positions. At the moment, however, cash is still a good place to be while we wait to see if the storm clouds will pass. Volume is backing off as price rises, producing some bearish divergences on charts which are already in confirmed downtrends. I’ll be watching steep rising trend lines for potential breaks to the downside.
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: MGA, VMED, TCK, VHC
Swing Trading Candidates:
NONE TONIGHT – 100% Cash
[table “98” not found /]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.
