This morning trading was a bit difficult as we had a big sell off during yesterdays closed, which cause this morning price action (while relatively strong) to present difficult opportunities due to the lack of follow through broad base (and lack of ability to get out of yesterdays trading range) for both long and short trading ideas. I’m betting most traders who were able to book profits, did so into momentum and were very diligent in determining risk-only trade compare to trade ideas that had good probability for follow through.
Another element that created a difficult trading environment was the internals not presenting a strong bias in either direction. Even though the VIX did trade lower(bullish) most of the morning it didn’t translate to increased follow through as the morning session continued forward.
The afternoon provide good opportunity to the short side as the Euro continued to break down taking the SPY with it. While the euro and the markets did sell off you had to be in the right stocks at the right time to take advantage to the move lower. Being prepared to short already weak stocks presented the best opportunity for follow through in this stock specific market.
Looking forward it is extremely important to have trade ideas for both side of the market and imperative that you focus your attention on the best stocks that have the highest probability for follow through and good risk/reward that warrant taking the trade. It is easy to get chopped to pieces in this market as the moves are not broad base but very sector and stock specific.
