TheStockBandit.net

Boy, is this market crazy or what?

Just since yesterday afternoon, we’ve seen a huge rally, sharp selloff, steep bounce into the closing bell, giant gap down and an immediate big bounce. Stocks are literally all over the map!

It’s quite a show, and I’ll venture to say that most traders are better served spectating in this market than speculating. If you’re not nimble, it’s incredibly easy to get burned, because just like springtime weather, it can change quickly out of nowhere.

Stay careful out there, and don’t be shy about protecting that capital while these violent swings play out. We covered our lone overnight position in ESI this morning for a nice gain on the short side, but at the moment we’re sitting in cash at TheStockBandit.com. It has served us very well to stay cautious in recent weeks, but once things smooth out a bit we should see much better conditions for more aggressive trading. While you wait, enjoy your front row seat to the show and don’t succumb to the urge to overtrade this market!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

Technorati Tags: Stock Market, Day Trading, Stock Trading, Investing, Swing Trading

I love trading with the wind at my back, so when the market is strong I’m a buyer, and when it’s weak I’m looking for short sales. In general, it serves me well to trade this way, but inevitably there are times when I wish I had thrown caution to the wind!

Take last week for example. VRTX was setting up with a very well-defined bull pennant pattern, but I was cautious with any bullish setup due to the overall market weakness. The environment was bearish, so even as I saw this bullish setup I wasn’t very interested. The pennant even formed on decreasing volume, which is exactly what I like to see with this pattern, and I still passed on it. Here’s a look at the chart I showed to members at TheStockBandit.com last week as a stock of interest, although it was never listed as a trade candidate:

(Click for full-size image, courtesy of TeleChart)

As fate would have it, VRTX took off and has still not looked back. Here’s how it looks after Tuesday’s bar:

(Click for full-size image, courtesy of TeleChart)

Each time I saw it hitting new highs intraday on Tuesday I felt pangs of regret and guilt for not being in the trade. As it climbed higher and higher, I felt more and more foolish for not having bought such a sound pattern! What was I thinking?

And then it hit me: that isn’t my trading style! Taking trades which fly in the face of general conditions isn’t what I’ve built a trading career on. Rare are the times that trades have paid me well when I did throw caution to the wind. Catching this trade would have meant bending my rules, and while that may have paid off for me this time, making a habit of it would no doubt prove costly.

And suddenly it was alright that the stock had taken off without me. After all, I don’t have to catch every single move, plus the reason I wasn’t in the stock to begin with was because I had followed my discipline - not because I ignored it. My game plan doesn’t involve swing trading strong stocks in a weak market, and VRTX fit that description. Particularly when market emotions are running high, I’ll defer to general conditions over my conviction on a given trade, and that has saved me many dollars over the years. I’ve missed out on the occasional strong move (like VRTX) as a result, but my discipline when things get ugly has allowed me to protect both my capital and my objectivity while others are losing theirs.

So while it can be at times frustrating to miss out on a great move, sticking with your game plan and letting your discipline guide you will over time pay off very nicely. The occasional stock will laugh in your face and you will at times feel crazy for having let it go without you, but good trading will involve missing out on some moves. Put the odds in your favor as often as possible, and only trade when the conditions suit your style.

I hope you’re trading well this week!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

Technorati Tags: Stock Market, Day Trading, Stock Trading, Investing, Swing Trading

Daaaa Bears.

Again.

Three straight weeks, and all of a sudden the bulls have gone from first to worst. Of course there’s only 3 camps out there (bears, bulls, and sideliners), but still, the pain level is increasing and bulls simply keep responding by raising more cash. Unloading shares. Joining the sideliners.

This remains a time to avoid the long side while the carnage continues, which means if you aren’t short selling stocks that cash is the next best alternative. You’ll have plenty of chances to buy once a real low is made, but so far this market is still searching for it. Of course there will be some lucky schmoes who happen to buy the lows (once they are seen), but rest assured it won’t be on their first attempt. And the charts aren’t showing us any reasons to think that time is here yet, so patience is a must at this point.

Perhaps the bulls will get some help this week from Bernanke & Crew, but even if they do, the key will be how a bounce is treated. If a bounce is produced, it’ll be difficult to trust for anything other than a quick pop, as all the others lately have been used for selling into. Either way, it should certainly be interesting! Be sure to check out this week’s Market View page over at TheStockBandit.com before you start your trading week for a closer look at the indexes and some chart comments.

If you’re a bull, remember that this too shall pass. But right now, the bears are growling and they deserve some r-e-s-p-e-c-t!

Trade well this week and stay patient out there!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

Technorati Tags: Stock Market, Day Trading, Stock Trading, Investing, Swing Trading

For the past year, every dip has been bought. Bulls have enjoyed a nice uptrend, and with each higher low their confidence reached higher levels. Anytime stocks have gone on sale (ie: come under pressure), the buyers have been there with wallets open ready to scoop up shares. And they’ve been compensated quite nicely for it, I might add!

But things have changed. Stocks have been punished lately, and the swagger of the bulls has disappeared. They’re not eager to provide support, and instead they seem to be getting more spooked. Dips have become all-out selloffs, and the buyers are nowhere to be found. In fact, even the bounces have been brief, as bulls become sellers and jump quickly to unload shares into any strength as they seek to raise cash levels. Concerns are running high.

As the major averages reach multi-month lows, it seems emotions are reaching new multi-month highs. And when emotions are playing an increased role by boosting volatility, trading can get a lot more complicated.

I’ve noticed lately that resistance levels are being respected much more than support zones, and that goes with the territory of a downtrend. Take the S&P 500 for example, as it undercut the 1485 area last week with ease (like it wasn’t there), but failed to reclaim it this week on the bounce attempt. The same level which was ignored to the downside was like a brick wall on the upside. As traders, we have to pay close attention to these kinds of things, or else it can cost us dearly. The dip-buying mentality which many have enjoyed for so long is simply not working right now. Key moving averages are being sliced as if they aren’t there, and that’s just one example of how the environment has changed. It’s time to adapt if you haven’t already.

So here’s the bottom line. Unless you’re a trader who’s very quick on the keys and can scalp effectively, or you’re willing to short sell this market, cash is the place to be! Don’t attempt to buy dips in a market like this until some stability is seen and the dust begins to settle. Once a new uptrend emerges, there will be plenty of opportunities to catch a ride, but you sure don’t want to be the first one to buy. Remember, the first person at a party has no fun.

Respect the current market weakness and live to trade another day!

Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com

Technorati Tags: Stock Market, Day Trading, Stock Trading, Investing, Swing Trading