Quick Summary:
Today's breakdown starts to give us some clarity. Trading game plan to short weak strength, stay content with current shorts or go 100 percent cash.
Video Analysis:
Today's intra-day analysis went over $SPY, the $GS and $BITA trades and focus list stocks.
Key SPY Pivot Levels: Round number $200, Old high 201-202, 50 dma 197.01, 100dma 195.12 , gap 193 pivot lows 190-191
Under the Hood and Trading Game Plan:
A lot of traders were caught on the wrong side of today's move as many thought we were in the midst of another "buy the dip". Not us. While we recognized the fact that dip buying has been the trend for quite some time now, as we talked about, this one felt different. This isn't just gut instinct, it's based on poor volume and price action.
Now that we are starting to see at least a short term trend develop, we can start getting a little more aggressive with out shorts. While I was still wary of a bounce and only had a "slight short bias", notice that I ditched entering with only half sized positions for both the $BITA and $GS shorts. I wanted to be in position for a hard move down, and it looks like that's what we are getting.
My plan for tomorrow is to short if we get some early strength. This gives more room to fall if we test the 200 dma or May unfilled gap (see chart) If not, I'll be content to ride the existing short positions.
Remember that big moves like today often have multi-day weak bounces before falling again. A weak move in the coming days does not negate the "August retest" bias.
Current Trades
Shorts $GS and $BITA. No trades today.
The Trade Results Journal/Spreadsheet is up to date
The Focus List
The longer term and short term focus lists were almost all read today. Only $GMCR and $MBLY gained more than 1 percent, and $MNST, $TWTR and $GPRO basically broke even. Do you see why we were only looking at strong stocks for longs to begin the week? Getting caught on the wrong side of a bounce play when not yet extremely oversold can lead to big losses.
Unless we see a character change tomorrow, I am not looking to get long anything with the exception of the stocks listed above. See this blogpost for how I am watching $GMCR. If the change does happen, rest assured that I will send an alert or update to your email.
I talked about shorting strength. My preference is to use leveraged indexes here so as not to get caught on the wrong side of earnings since earnings season starts tomorrow. It's not just a matter of avoiding stocks with earnings. Let's say a steel stock like X had earnings. Blowout earnings could cause a stock like STLD to go up. So for now it's the indexes and a few select stocks.
SPY: $SPXU
Russell: $SRTY
Nasdaq: $SQQQ
Semi: $SOXS
Market Leaders
Key level for $GOOGL is $570. A break here could lead to a leg down. Current trade $GS has strong support at $175. $NFLX at $420. $CAT looks broken and may be replaced soon.
Please read the post 23 Laws of the Part Time Swing Trading the Market Speculator Way and How to Anayze Your Swing Trade Results It is important to know these rules if you trade off the Report.
New subscribers and trial members please leave me any feedback/comments in the comments, via email (singhjd1@aol.com) or twitter (twitter.com/PaulJSingh).
