Wednesday, September 1, 2010

Keep your eyes open for shorts!

As I was anticipating for the past few days, the markets put in a size able bounce today. I admit that predictions do not make money! Preparation for probable scenarios as well as improbable ones and consistently allocating risk accordingly over a period time is what makes money. However, it does feel good when you are right... lol.

Anyways the point of this post is to remind that we are still in a longer term downtrend as far as I can see. Even if we do put in a bottom here, weak stocks will likely continues to decline for a while before following the markets lead and bottoming out too. So at the very least we can put risk on in weak stocks with swing trade type expectation as opposed to position trade type expectation.

One stock in my watch list that I am particularly interested in is LULU. LULU recently broke support on heavy volume and now appears to be pulling back to resistance. If LULU forms a melted candle at resistance ($35.40ish) this could be a good risk/reward swing short with high odds of working if the overall markets aren't rallying too strong.

A feeble rally here could set up excellent shorts but with a strong rally I would exercise caution with short trades and instead look to trade breakouts from bases or continuation pivots in strong stocks like RDWR, PAY, SPRD, CMG and PCLN.

So those are my thoughts. Good luck and good trading!


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