The market provided great action for calculated, nimble technical traders today. Whether you were looking for some quick downside follow-through, looking to play a reversal, or both, the action played out somewhat according to plan. Based on the fact that this rally has been unable to sustain two harsh down days to this point, it was not a surprise to see the market reverse after entering the gap down through the $121 level in the SPY.
If you came in short Gold after the harsh reversal yesterday, you may have been alarmed to see the gap up, but the morning gap fill could have given an opportunity to book those profits. If you came in short SPY after yesterday’s first harsh down day in a while, you could have held as the market went negative this morning, added below yesterday’s low and covered below $121. If you were looking only for a “buy the dip” trade, you got it when SPY crossed back above $121.12, since it never hit the technical buy area of $1197-1202.
High beta tech stocks gave opportunities for good shorts and longs, too. Apple Inc. (Nasdaq:AAPL), Amazon.com, Inc. (Nasdaq:AMZN), Netflix Inc. (Nasdaq:NFLX) and Baidu.com, Inc. (Nasdaq:BIDU) were all weak early after the open, but blasted off again. NFLX gave another technical buy through $175, BIDU pushed through $110.90-111.25, and AMZN woke up and closed on the highs. Goldman Sachs Group Inc. (NYSE:GS) was a nice technical buy in the hole around $165 if you the trade banks, and Las Vegas Sands Corp (NYSE:LVS) finally paid the patient shorts through gap, although I was not among them as I gave up on the trade.
The key to giving yourself a chance to make money everyday is to have an individualized, daily plan that is suited to the current technical conditions. While yesterday’s sell-off was a “day to take notice”, it generally takes three of those types of days to really derail a strong rally. Long-term investors and swing traders were wise to clean up some loose positions, but had little reason to panic. For the quick active trader, today’s lack of clear set-ups necessitated a nimble approach, and prudent traders took a quick-move approach. Tomorrow, we will come back with another specific gameplan.
*Disclosure: Long AAPL, NFLX, BIDU
