Good evening StockBandits!
After rallying to fill gaps from the previous week, the major averages ended last week with harsh declines off Thursday’s highs to finish lower on the week. Obama’s speech Thursday night did little to ease concerns, and with continued debt worries over Greece, traders had no interest in buying stocks. A downside gap on Friday of about 100 points on the DJIA evolved into a 300-point decline by the closing bell, adding to the weak historical seasonality of September.
The trading ranges which formed in early-August remain intact, although a brief push beyond the upper boundaries was recently seen before failing. Each of the indexes now sit in the middle of their respective ranges, giving them some room to rally or slip further before a meaningful technical event would occur.
Upside progress continues to be limited for this market, despite some quick rallies in recent weeks. Those have merely been met with more selling, leaving this market right in the same place it was three weeks ago. In addition to the frequent reversals, we’re seeing regular overnight gaps. This volatility in turn makes for some very messy trading at the moment, as the daily charts aren’t allowed to put in rest and build reliable patterns.
Patience is a necessity right now while we let this play out. The correction may not be done yet, so it’s important to keep an open mind as to what happens next. Should support get defended again, we could rip higher and clear the highs of two weeks ago on the way to a better attempt at recovery. However, should we happen to see support get broken, the selling pressure could mount once again as traders rush to raise cash and head for the sidelines.
What’s important to me right now is protecting capital by avoiding the visible risk in the charts. By holding cash overnight, I’m not exposed to the gaps we’re seeing almost daily. And with bases nonexistent right now, taking day trades with tight risk is the best way to avoid giving stocks too much room to fluctuate. Those who are throwing caution to the wind are finding this a frustrating environment with limited follow through, and they’re seeing gains quickly evaporate while also having to book some sizeable losses. I don’t want to join them, so I’m taking what the market offers while waiting for better conditions – and they will arrive for those of us who are patient.
Finally, it’s nice that 9/11 fell on a Sunday this year so we all have some time to reflect and remember the events of that day, think about those who fight for our country, and face the new week with renewed gratitude for the freedoms we have. There are lots of inspiring stories of heroes, both known and unknown, that serve as a reminder to us all to be alert and be willing to help anyone in need.
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!
Video Stocks Discussed: OPEN, TZOO, PFCB, WBC
Swing Trading Candidates:
NONE TONIGHT – 100% cash.
[table “121” 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.
