The market gave lots of warning signs that this was coming, so too will it tell us that the worst is behind us. With Russell 2000 (IWM) at the 200 DMA in a dramatic end of day drop, with RSI's super oversold, I would not be surprised to see some relief on Friday. I have 3 classic bottoming formations I look for. Watch this week's videos for the explanation.
S&P 500 (SPY) 129.35 the weekly moving average. Through today's high expect some upward movement
Russell 2000 (IWM) 200 DMA at 75.26 to be precise.
Dow (DIA) Never underestimate the power of following a range break after an inside day.
NASDAQ 100 (QQQ) Never seen such low daily RSIs. But back above 61.85 could see some relief
GLD Had to follow the gap higher today as this is what happens when an instrument is oversold-it screams "I'm ready." 154 resistance
XLF (Financials) 14.45 is the best number I see to penetrate for a more confident sign of reversal off of the lows Subs: FAS touched down on the 200 DMA so watch this
IBB (Biotechnology) Triple tops indeed. A weak unconfirmed warning phase-big clue if can hold here-or predictor of another leg down
SMH (Semiconductors) looking at the 200 DMA at 31.53 to hold possibly
XRT (Retail) Remember the bear flag I wore about earlier this week?
IYT (Transportation) After it fell below 91.00, the short was obvious. 88.20 the 200 DMA
IYR (Real Estate) 59.64 April 10, 2012 low
USO (US Oil Fund) Thursday it held Wednesday's low and still oversold. Could see a test of 37.00
OIH (Oil Services) Equals the QQQ in most oversold daily RSI I have seen
XLE (Energy) At 62.50, I would have to be a buyer
TBT (Ultrashort Lehman 20+ Year Treasuries) Most oversold weekly RSI I have seen in quite some time
Subscribers: Hopefully this week illustrated how using the top down approach, watching the indexes and ETFs influenced how committed traders should be to the long side. Many traders are not comfortable going short. But the mistake that all traders make are getting out too early on the winners and staying too long on the losers. Correct that while the market is in decline, and you will be a much more successful trader for it. My job is to right your wrong habits, educate you on a trading plan, help you look at the whole picture, and then give you some choices to consider. Everyone loses money. But what separates the pros from the amateurs is knowing when to reduce position size, risk exposure and most importantly when to load up and ride the longs when the market turns. And it will. That I promise. Timing is everything.
Longs: On categories: Gap higher days we go to all categories and choose ones with lowest risk that break the opening range. On weaker days, we look at Category 3, especially if the picks hold S1, previous day lows or a major moving average and have a good risk on the reversal. The difference between Category 1 and 2 is the stock condition-a Condition 1 is strongest stock and more likely to make a parabolic move. Note: Very judicious in the long picks tonight.
Earnings Plays: CRM Got down to the 65 weekly with an oversold RSI. Up big in the aftermarket.
Category 1: (Aloha) Positive Phase, Condition 1, 2 days under the FTPs, Risk to Previous Day low, Can buy ½ over FTP and ½ over R1, Target- Day to at least 3 ATRs from entry:
N/A
Category 2: (Pipeline) Positive Phase, Condition 2-3, 2 days under the FTPs, Risk to Previous day low, Can buy ½ over FTP and ½ over R1, Target- Day to at least 3 ATRs from entry:
N/A
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means candidate for Opening Range Reversal, Risk S1 or previous day low, whichever is lower unless noted differently, Target- Day to at least 3 ATRs from entry:
LGF 12.00 max risk and must clear and close above 12.50 to stay with it
Category 4: (Rip Tide) Oversold (2 or more days under FTP), Condition 1-4, Needs to clear R1, Risk previous day low unless noted differently, Target- Day to at least 3 ATRs from entry:
GNC Touched down on the 50 DMA. Today's low max risk has to clear 37.15 the FTP
SWI Hammer candle. Over today's high clears the 10 DMA and must hold there to stay long. 44.00 area good risk.
EW Provided 82.50 holds, 83.00 is the FTP and first point to clear
CERN 78.55 the FTP to clear. 76.80 the 50 DMA max risk
Other: Daytrades or more since fell to 80 monthly, 200 weekly or daily moving averages, risk today's low and well oversold: JOY POT BID F NTAP QCOM CLR KLAC
Shorts: Hard to find stocks not oversold
ADTN Should not clear 29.60
APOL Cannot clear 32.19
CHRW Cannot clear 60.50
CXO Must not clear 88.86
Goodnight!