Basically, it all came down to the noon time puking of many growth oriented names, not necessarily momo stocks to mark what we think is a tradable bottom as of now. Why is it a tradable bottom? First, there were signs of panicking among some of the well known names intraday, actually quite the panic and they all came back strongly toward the end. Actually, what we saw was scary enough that we did not not where it might end by the close the way it was going at lunch hour. It could have gotten really ugly if not for a few news items related to the insurers that started to help the markets around 2pm (eg.charts of ABK MBI). Second, during the worst level of the session, financials and retails, the two most battered group of last few months, had actually held their ground. Surprise. When the financials stabilize, it provides ground for traders to look for upside action. Still, we don't doubt the retailers will feel the traders pinch soon enough, Sure, we may have not all entered long positions today, but we are not here to hit the exact the bottom, but 2pm + seemed to be the green light of sorts looking back. We just wanted to see the bottom forming. Pure and simple. If it's real, we all have plenty of time to enter positions as we don't expect the recovery to last an hour, a day. We expect a ' true' bottom to give us more opportunity than this. So, don't fret tonight , many of the stocks still finished in the red today (thats how bad it was) and are still way off 9ema as a measuring stick. It was all of 2 hours so far in our books. We want and expect more for what we've patiently waited for. By the time Naz turned green, it just felt inevitable that we are at that point, the reversal point after a head fake or two by the Dow leading us on today. Remember this to take with you into a what looked like a bummer trading day....."If the market can somehow shake off the AAPL news by the close, we'll then know if yesterday was anything of a bottoming process beginning. This is farfetched, but anything can happen in this craziness and if the market show signs of this late in the day then we know the buyers are stepping up and then we should all probably too". Not only did it it shake off the AAPL, but it shook off everything that came after 8am today that shook the market to another big gap down open.
Keep in mind, nothing has changed in the economic environment. This is what we think was a tradable technical bounce, but it in a bear market even they can last a while. Can this bounce turn into something really special? We'll reserve that judgement at this point and will have an answer in a couple of weeks. For now, we'd be looking at Dow 12700 and Naz 2450 as potential area of resistance. It doesn't mean that we'd actually get to those levels but in case we do get a good rally going, that's where we'd be looking for some stiff resistance.
What to play and how to play? First, whatever you want to play, don't commit full size and too many plays. We are only doing 1/3 of our usual size and leaving a hefty cash % in our account. Secondly, do partial fills. We are not going to long 1k of BIDU or GOOG or anything and hope for a 30 pt run-up. We are trading plays in this bounce with multiple fills and small lots each fill, in order to protect from sudden change in sentiment as of now. Again, this is not going to be an easy trading environment to take advantage of and everyone needs pay caution to make it as best as they can. Now the plays... We are sticking to those plays that have either released good earnings or those plays that aren't releasing earnings until at least next week. We wouldn't want to be touching stuff that are releasing earnings tomorrow because earning risk just isn't necessary..ever. We are also sticking to well established and well known liquid plays because that's where most of the hedge fund/institutions would be gunning for as well . So, no cheapies and no illiquid ones. We mentioned ISRG today as a play in a tight trading range that was actually near 9ema and may breakout. That's hard to find these days.
Some key reports to look for tomorrow morning which may affect our play selection and strategy.... premarket POT(chemical/agri. group), WFR/SPWR(Solar market) can potentially lead us into these momo sec's for a trade , AH's we have MSFT(entire tech sector). The key is that not trying to catch every single gainer out there. As long as you catch a couple of good ones, this potential bounce will be that much worthwhile to you.
Please remember to visit the site periodically to see if you are subscribed to email delivery pages. Sometimes a maintenance upgrade bug overnight knocks some of them off. Considering we've missed maybe one Journal entry in a Year and half, which we notified in advance, it would be prudent of you to sign in/ check in on site and check your "profile" and then " subscriptions" if you did not receive your Journal by email before 830am est. This should ring a bell to check if all is right with your account before the trading day starts.