Tuesday, November 11, 2008

Even with the Selling, Leaders Have Held Up Well

After I thought about today's action and also the fact that we've been down four out of the last five days, the more I thought I don't want to short right here. It is certainly possible we follow-through tomorrow to the downside, but this market hasn't exactly been one that's good at following-through on any action for a meaningful period of time. Although we could fall further, we are getting oversold and any more selling tomorrow would put us at oversold levels. So if the trend is not having a trend, it makes sense that we should bounce back up at some point in the next few days.

I'm not saying I am bullish - just saying that I don't plan on getting short and I think doing so here could cause problems. I did check out the current market "leaders" during my scans and there is good and bad news. The good news is that the charts I've highlighted over the past week or so have held up remarkably well for the amount of selling we've seen the past four days. Most of these stocks below have held support and their pullbacks have come on lower volume - very important.

LHCG, CRI, GB, VASC
APSG, QCOR, ESI, DV
ALK, LCC, UAUA, DAL
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

The bad news is that these continue to be the only charts I see. I am still not getting new candidates pop up in my main bullish scans. If we are to have anything more than a few days bounce amidst this chop, we need more leaders to show up, preferably from groups other than medical, education, and airlines. I still continue to see many potential inverse head and shoulders pattern as I showed this weekend, but the problem with most of these is that volume is not coming in right now. Some of those candidates broke down today, but many held up fairly well. In order for these patterns to be valid, however, they need to bounce now and with heavy volume to form their right shoulders. Volume continues to very low on both up and down days for the overall market, which is probably a reason the intraday action has been so
volatile.

My game plan right now is to stay away from chasing shorts here (although I realize we could fall apart - I just don't expect it) and continue to focus on the leaders to see if we can get anything going to the upside. I am not that optimistic, but continue to be willing to give the market a chance to prove itself. More than likely, I will do what I did today - nothing. Good luck Wednesday.

A special "thank-you" also goes out to any veterans out there that read the blog or just veterans in general on this day of remembrance for our country. We appreciate your service and sacrifice to our country - although our country has its problems like all others, there is no doubt it is still the best place to live in the world, in large part to those veterans who serve. Thank you.

4 comments:

Anonymous said...

take a look to an HS in the VIX. Thank you.
http://social.stocktock.com/photo/vix-hs

swingtrader said...

I actually went short yesterday on an oil service stock, expecting a test of recent lows and used that recent low as my target price. I got a strong down close at the lows today (Wednesday) and expect to get taken out tomorrow. I agree that shorts should be monitored here given the consolidation mode, but the larger time frames still appear to be in downtrends for the market and most stocks.

I am typically in trades 3 to 10 days tops, so my style may differ from yours slightly. But I am still MUCH more comfortable being short stocks right now than I am long.

Great blog by the way - I have found also that blogging helps my perspective as well.

Mac said...

If you were short any oil today, good for you. Those stocks got killed today. I wish I would have followed some of the setups I posted on the blog.

I will check out your blog. Thanks.

swingtrader said...

Live to trade another day - that's the name of the game.

I have found that if I see my defined set up and entry criteria are met (which I keep very simple), I at least do the trade with play money if I can't commit more capital to the market. I track about 40 stocks, so I may have up to 10-15 stocks set up all at once but not enough capital to do all of them. I track them all the same so it's easy to see if the setups are working even if no money is committed.

On my blog - it is a mix of politics and market analysis. I try to keep it simple on the blog, since some readers don't trade the market. But I am only part-time trader so I have to keep it simple for myself also. The style I found works best for me. My main weakness is formulating profit targets - I typically just use the recent lows/highs on the daily chart, so I sometimes don't catch profits I should. I am still working on taking partial profits at the target and letting some ride, but that can be problematic since I have a day job. But I am progressing...

Good luck rest of the week - stay patient and disciplined.