July 08, 2011 at 9:19 am | | Comments 4

Stretched is an Understatement

To say the run of the past two weeks has made the market stretched to the upside is clearly a major understatement.  It’s been a face-ripping rally for anyone caught on the short side, while underinvested bulls gnash their teeth in nearly equal frustration.

It’s been a tricky environment in recent weeks, yes, but there is still opportunity if you search for it.  The momentum run has offered some nice day trades, even if it has left many stocks overbought on the daily charts.  Even a few days of rest would do wonders for those charts.

Speaking of rest, this market is poised for it, but will we get it?

The reaction to the jobs number this morning offered the perfect sell-the-news scenario as extremely overbought readings (no matter how you gauge it) left the market badly in need of some profit-taking, some lateral price action, or both.  While the result of the turn lower this morning remains to be seen, we do know this:  the buyers are finally standing aside to take a breather at the very least.

Thankfully, as short-term traders we don’t have to predict what’s going to come of this market in the next few days.  What matters is that we continue to work the charts and trade what’s right in front of us.

With that said, a pullback here for a few days or even some short-term trading range price action would help to establish some new patterns and bases from which to take multi-day plays, one way or the other.  That may not mean excitement for a few days (if we do get a rest), but it would certainly mean greater opportunity on the other side of it.  I, for one, am excited about that possibility.


Chart courtesy of TeleChart


Chart courtesy of TeleChart

Those who have walked away for the summer have already missed considerable movement, and yet the market promises more going forward. Are you ready for it?

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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  1. Hi Jeff,

    Do you think it’s the right moment for a quick short ?

    Thanks and have a nice day.


  2. Hey Dennis,

    If tabs are kept on it continually, then yes I think that can be considered here. However, keep in mind that shorts will be eager to cover and bulls are likely to aggressively buy the dip, so it may not carry far on the downside before we see things stabilize. Stated otherwise, I think this market will have a bid beneath it before we give back too much of this run.

  3. Hi Jeff, (the Master)
    I wonder if you remember me from last year. I still receive posts from you and the past few have been spot on. At the time that I started my subscription I was pretty new to trading and I was only trading stocks; for that reason your analysis on a day-by-day basis were just too expensive for my little portfolio. Since then I began trading options (January 2011) I had a great run until Late April then the bottom fell out.
    I wasn’t crushed but it left enough of a scar that I realized that if I were more adept at the shorter term strategies (even scalping Day Trades) I probably wouldn’t lose much, if anything, during those market reversals.
    To test my theory I’m going to start to try the shorter term strategies in Paper Money. If I can become as adept and comfortable in my short term ability I’ll be back.
    I’d like to tell you that I found your analysis and forecasting almost scary in accuracy and, in that respect, almost invaluable. I just want to perfect my own ability to pick the winners myself so that I don’t just start to mimic your choices without doing the work myself. (I tend to be a bit lazy) I want to be able to say I figured this out on my own.
    I just thought that you might like to know that your guidance lately has put my mind to rest about what the market is doing and I’m Trading again.(I took a two week break after getting my butt kicked). I hope this letter finds you and your family well and I look forward to rejoining you in the future.
    Jim Sommer (the grasshopper)

  4. Hey Jim,

    Great to hear from you again, I’m glad to know you are doing well! Thank you for catching me up on how you’ve been too. I sure appreciate your kind words. The market levels really are useful for knowing potential pauses or turning points, and those who trade SPY or QQQ love them for that reason.

    When you say you want to learn to do this yourself and not mimic my choices, have you checked out the Advanced Trading Course? I know you enjoyed the Basic one and the Advanced really covers exactly what it is that I do each day and how I approach various trading conditions. Great way for you to get equipped to be self-serving!

    Anyway, glad to get an update on you and look forward to seeing you soon.

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