Quick Summary:
Join the members only webinar. Indexes recover after morning gap downs, but fail to take over key levels. Discussion of gap downs at the open. Analysis of the 3 main charts we are watching.
Webinar:
Kunal and I are going to start regular webinars for members only. Tomorrow we will discuss strategies for this market, how to adapt, managing risk, advice for part-time traders and small account holders.
If you have anything you'd like us to discuss, please email me Singhjd1@aol.com. Join here:
http://app.webinarsonair.com/register/?uuid=0c83f72f374f47daa7ef7f2fc7f037b3
Trader Education: Gap downs that rip through your stop
If you have been a member for a few months now, you continually here me talk about sticking to your stops. The fastest way to blow up your account is to widen your stops thinking the stock will bounce back the moment you exit. However, there is one exception to this rule: gap downs at the open. When there is a gap down that jumps my stop, assuming my stop is mental and not a hard stop, I watch for a few minutes, market the low, and wait for a reversal. If there is not reversal I get out.
The morning was tough today. But by being patient we went from losses to very nice gains. Keep this gap down strategy in your trade management arsenal.
Current Trades
I exited the remaining portion of the QQQ bounce trade (TQQQ) for a nice gain.I held on to $DIG but did not exit on strength. This is one I will play for multi-day gains. In the cart below you will see there is a gap fill at $62.50. That provides a good target.I am still holding TKMR, which was weak today but has not hit the stop level and is still within the range.The format is a bit different today since we have ditched the regular focus list and are only focusing on 6 index/sector charts. We are watching key levels to get long for a bounce play on each of these six charts. Near term I am now keying in on 3 charts, $SPY, $QQQ and $DIG. While $IWM and $SMH still worth watching, the charts for the 3 chosen are "cleaner" and easier to trade from.$DIG, as with much of the energy sector, bounce strong today from extreme oversold conditions. The sector is so oversold that I think there is still room to move. There is a gap fill at $62.50 that provides a good target. It could even bounce higher, with the 200 dma all the way at $75. It is up to you to decide on partial profits or hold on.Notice that the 50 dma is sloping down and about to cross the 200 dma. This is a bearish pattern. Once we get a bounce and failure, I will likely reverse course and get short (via DUG).
The QQQ stalled right at the gap fill and yesterday's highs. We would have liked to have seen a strong move at these levels. Expect volatility. I don't see a good entry here. Watch the levels on this chart. I can't form an opinion until we see how these levels are handled.
Same analysis applies to SPY. We need to see how key levels are handled. My preference is another remove down that allows us to play a bounce. Notice that SPY also failed at yesterday's highs.
I still do not feel it's a good time to trade individual equities, though if good setups do form I will point them out. Make sure when making any trades to keep risk smaller than normal and adhere to stops. Do not get in the mode of thinking the market could bounce at any time and fear missing out. If your stop is hit, get out and make you do not suffer a big loss.Keep in mind that while I am trading for a bounce, it does not mean I am bullish on the market. There is still room to the downside and the bounce I am playing is a "pullback before another drop" type bounce. These are not long swing trades, they are much shorter trades than I normally make. We adjust our styles to the market. 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).
