By: Scott Redler
One needs to be a professional AND to have the right tools in order to surgically remove 30 handle moves from the market. A plan must be in place, and then the market needs to confirm it for one to fully capitalize. After the uptrend broke at 1,130, there was a 60 handle down-move to the 1,070 area. The market bounced from that zone back to 1,110-1,104 and forged a “lower high” (prepared traders were ready to sell that zone). Then, the market turned tail and hit 1,044 Friday–another 60 handle move–before reversing higher. From 1,044 the market bounce from approximately 9% off of the January highs–our 1,025-1,045 BUY ZONE–took us back to the 1,060s.
You don’t need to take the entire move, but if you traded the “easy money” part, you could have taken 30 handle moves out of this market.
WHAT NOW?
We have a new point of reference from Friday’s reversal low in most stocks and most sectors. The market will probably try and hold that low, and create a new pivot area as we did in the 1,080-1,085 area. That former pivot will now serve as new resistance.
Friday’s reversal could relieve some short-term pressure. If the market wants to build on it and bounce, then the same way we thought 1,100-1,115 will cap the last oversold bounce, 1,080-1,095 will be the area to put some shorts back on. The will be the area to measure the strength of the Bears.
This type of tape is tough to trade, but can be very rewarding for those who execute well. You need to watch the leaders in order to assess market composure. On Friday, Apple (AAPL), Research in Motion (RIMM) and Amazon (AMZN) were all strong, as were Goldman Sachs (GS) and Freeport McMoran (FCX). When the market followed through, “relative strength” turned into legitimate strength. Combine that with the 1,025-1,45 zone we were watching for a bounce, and then you get a great trade.
You need to plan your work, then work your plan. This week should be pretty choppy. Take trades and move on.
