Tuesday, September 1, 2009

Some Thoughts After Going Through My Scans...

After going through everything, I didn't see as many breakdowns in individual stocks as I expected to see. Sure, many pulled back and some broke key technicals levels today (see MS as it broke a trendline from November '08), but I also saw a lot of stocks pull back into levels that I believe they can bounce from, at least for a little bit. Two recent high-fliers (KONG and WATG) are both coming into areas of May highs and June lows that could (I think) provide support once again. If a stock like BAC pulled back even more to the $15 range, where its 50 day moving average is coming up to to meet its former highs of May, I would consider a swing trade long there anticipating a bounce. I also saw a few stocks like AM and ELGX that look like good setups regardless of the market and held there own today. There are others but those were ones that stood out as possible trades.

Possible Pullback Trades?
Decent Setups Regardless

On the indices, we are setting up a possibility similar to what we saw in June when a head and shoulders pattern set up but then later failed. If we do pullback further over the rest of this week, perhaps to the August spike lows or even to the 50 day moving average, and then bounce back up from there, a head will have appeared to form on the daily charts. Then we just have to watch that bounce and see how it forms. I thought of this today looking at the indices but when the Worden Report mentioned it as well tonight, it gives a little more credence to this idea. Will a setup like this be too obvious much like it turned out to be back in June? Will too many people think another H&S setup is too obvious to work after being misled in June and buy, only to be tricked again by Mr. Market? Who will outthink who? Ah, so many questions - it should be an interesting two months.

The indices
All Charts From Telechart, Courtesy of Worden Brothers.

Based on the lack of overwhelming breakdowns (again, I saw some but just not as many I expected), I am going to lean a little bullish for a bounce soon that I may try to play from the long side. I will reevaluate as we go and if the scenario plays out just watch the bounce very carefully for signs of weakness or strength. If we are putting in a major top here, it will take time and you have to remember that the short setups will come in that case. Be patient for them because as I said earlier, aggressively shorting here may not be the best idea. Good luck Wednesday.

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