So, how did you do on the Stocks Aptitude Test? Did the 5 W’s and H I wrote about last night increase you comprehension and critical analysis enough to help you sort your way through Tuesday’s session? The title of that passage could have been- The Fear of Default. Shorting NASDAQ after 2 inside days and covering at the 50 DMA was textbook! Anyway, here’s what we have now: if you think of yourself as a pinball machine rather than the pinball itself subject to bouncing around and hitting walls, then what we have is a potential blow out selloff with a test of the 50 DMA in the 2 that were leading NASDAQ and Russell 2000. Double the average daily volume, big price drop, run for the exits-all can create that scenario. Doesn’t mean we cannot go much lower or that tomorrow won’t open lower (liquidation from the highs will do that too). But, thinking like a machine and not a silver ball, if either of those two indices cross back over the 50 DMA and better yet, close above? Like the “deaf, dumb and blind kid”-sorry quoting not trying to be non-PC-who “ain’t got no distractions”, perhaps “play by intuition” and trade like the worst is over!
S&P 500 (SPY) Double the average volume here on a big down day could be the start of something even uglier, or the blow off as mentioned above. Either way, time to think risk/reward on longs and shorts and which make most sense Subscribers: Negative pivots in all indices
Russell 2000 (IWM) Unconfirmed weak warning phase. 104.30 the 50 DMA to watch
Dow (DIA) If there is something to learn from these dailies, it’s the law of attraction to moving averages-this one to the 200 DMA now super close.
Nasdaq (QQQ) 77.30 is the 50 DMA as this went into an unconfirmed warning phase.
ETFs:
XLF (Financials) 19.73 resistance 19.35 next support
SMH (Semiconductors) 39.23 good support area then it’s down to the 50 DMA
XRT (Retail) Another example of the attraction to the 50 DMA fulfilled. Getting oversold
IYT (Transportation) Broke the 50 DMA, filled gap to 115.72 and dropped lower now a bit oversold
IBB (Biotechnology) Flush job
GLD I have been so determined to short and now, has to break the range low of the last 2 trading session
USO (US Oil Fund)This could be a buy over Tuesday’s high, especially if it gaps higher
OIH (Oil Services)Holding up better than most-good place to look when market stabilizes
XOP (Oil and Gas Exploration) Has more room to correct now as a once giant!
TBT (Ultrashort Lehman 20+ Year Treasuries) FOMC minutes released Wednesday.
VXX Subscribers: Glad we are still long here
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: Anything that is on this list is a candidate for a swing trade-(of course market condition is a factor) -use the max risk mentioned along with an opening range stop using fudge factor and time confirms. I suggest you decide on 1 or 2 that have a risk you like and then position size accordingly
Category 1: (Aloha) 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:
HES Since it held 78.26 the low from 10/2 keeping it on list for a move over 79.25 first for ½ position then over R1 if can get there for the add
HCA Positive pivots and has to hold 45.45 then clear the pivots and then today’s high
CLH 58.50 max risk and with positive pivots, good one to watch for move over recent highs
BA Has a gap from 9/16 low 113.26 to hold and forming a tight wedge which could follow long or short. For now, thinking long if clears the 10 DMA
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can either buy a opening range breakout or candidate for Opening Range Reversal, with Risk S1 or previous day low, whichever is lower unless noted differently, Target- Day to at least 3 ATRs from entry: (Opening range reversals are good on anything above S1)
NOC Inside day and slightly negative pivots so has to clear R1 and today’s high which also clears 2 moving averages. Risk 93.50
Category 4: (Rip Tide) Oversold (2 or more days under FTP), Condition 4, Needs to clear R1, Risk previous day low unless noted differently, Target- Day to at least 3 ATRs from entry:
NSM VeryOversold and even a better category 4 as this landed on the 50 DMA. If holds today’s lows and clear 52.50 can do a starter position then see what happens hear R1
PETM after a 5 day correction, real close to the 50 DMA at 73.30 and oversold. Therefore, over 74.50 the pivots can start ½ position then see what happens at R1
Phase Change:
CYH Well outperformed and now has to hold todays low and 44.34 could see new leg up
CTRX Held up well! Positive pivots so an ORR will control risk to today’s low.
WMT Brick wall bottom with support at 72.50 level. Like on ORR or breakout as long as risk is good just to see if the pattern holds up
GMCR The slingshot low was 71.28 now less than an ATR away. So, if this can get back through 74.20, could be worth another swing trade shot
SWI Has a possible slingshot low with great risk under the 200 Weekly moving average which is just tested 32.91. Like R1 over today’s high for entry
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
TWC confirmed phase change to warning so 110.71 seems like a good risk now
Category 6: N/A
Bye For Now
