When Will The Selling Stop?
At 6:30 AM EST this morning the SPY was sitting at $258.79, the big question today will be “When will the selling stop”? The simple answer is when the buyers get in the buying mood. If we open today near the $258.70 area, we will be at or near the. Dotted Deuce. Over my years of trading, I have used the Dotted Deuce and 200-SMA as profit zones, support and resistance. There is a very good chance we will see tradeable action around the Dotted Deuce and the 200-SMA. Remember to be patient and wait for the buy signals and chart setups.
About a week ago in the trading room, we spent some time talking about how the SPY was getting too far from the 50-SMA and that was not normal, something had to give. Now let’s consider the weekly chart and Fib lines. Note that last time the SPY was near the 200-SMA (Mid Feb. 2016). Set a Fib line on the lows and draw to the most recent high. The SPY is currently flirting around the 23.6 retracements. The point I am making is price has pulled much too far away from a major moving average like the 200-SMA for a long-term weekly chart.
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On November 15, Rick shared ARNA as a trade for members to consider and how to use the trading tools listed below. Currently, the profits could have been about 55% or $1400.00 with 100 shares. Using our Simple, Proven Swing Trade Tools and techniques to achieve swing trade profits.
Candlesticks • Price Action • T-Line • T-Line Bands • Support • Resistance • Trend • Trendlines • Chart Patterns • Buy Box • Volatility Stops • Profit Zones • Entry Zones • Protective Stops • RBB Rounded Bottom Breakout Strategy • Pop Out of The Box Strategy • Pinball Strategy • Trade Planning… Learn More
►The VXX short-term futures
Have exploded hitting $60.00 plus pre-market this morning, note that is over the weekly 50-SMA.
Rick’s Swing Trade ideas
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Investing and Trading involve significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc. is financial or trading advice. All information is intended for Educational Purposes Only. Terms of Service.
Rick Saddler is not a licensed financial adviser nor does he offer trade recommendations or advice to anyone except for the trading desk of Hit and Run Candlesticks Inc.
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Clearly Below the T-Line
The SPY is clearly below the T-Line. Friday the SPY ran through the 20-SMA then landed on the 34-EMA Friday with a gap down on monster volume. This combination can only spell trouble! We always talk about Fridays should be a day to take profits and count your money. With the Bears still grazing this morning, The challenge of the 50-SMA seems likely this week. Because of the speed of the decline from Friday to this morning, I do not believe chasing is a wise idea. We will commonly look for trades after the market opens today and when the panic has calmed down. Throughout the day we will point out shorts and longs in our member’s blog area.
►Recent Trades VXX 375%
►Learn the Power Of Simple Trading Techniques
On December 13, Rick shared BOOT as a trade for members to consider and how to use the trading tools listed below. Currently, the profits could have been about 24.7% or $380.00 with 100 shares. Using our Simple, Proven Swing Trade Tools and techniques to achieve swing trade profits.
Candlesticks • Price Action • T-Line • T-Line Bands • Support • Resistance • Trend • Trendlines • Chart Patterns • Buy Box • Volatility Stops • Profit Zones • Entry Zones • Protective Stops • RBB Rounded Bottom Breakout Strategy • Pop Out of The Box Strategy • Pinball Strategy • Trade Planning… Learn More To learn more about our trading tools join us in the trading room or consider Private Coaching.
The VXX short-term futures –
I closed my VXX trade for 375% Friday, a good day to take profits, the VXX is on its way to tag our $36.75 line.
Rick’s Swing Trade ideas
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30-Day Trial • Monthly • Quarterly • Semi-Annual • Annual
Investing and Trading involve significant financial risk and is not suitable for everyone. No communication from Hit and Run Candlesticks Inc. is financial or trading advice. All information is intended for Educational Purposes Only. Terms of Service.
Rick Saddler is not a licensed financial adviser nor does he offer trade recommendations or advice to anyone except for the trading desk of Hit and Run Candlesticks Inc.
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Extreme Moves
We all know that that the bulls were over exuberant and pretty much everyone and their dog expected a pullback. However, Friday’s extreme moves appeared to be excessive, right? Honestly, not so much. If you put it into the context of a 16500 point rally in the first 25-days fo January, you realize it’s only a reversion to the mean. Nevertheless, the violent nature of the move is shocking an I doubt anyone expected a 700 point move in one day! Volatility is very likely to continue making swing trading very challenging. Don’t make a mistake and assume that the market is suddenly oversold and predict the will rally. It can simply consolidate before resuming a downtrend!
On the Calendar
The is only one report of consequence on the Economic Calendar today. At 10:00 AM Eastern is the ISM Non-MFG Index which has cooled recently but remains mostly in the mid-50’s indicating growth. Forecasters are calling for an increase to 56.2 today. After that with have some bond announcements and auctions to round out the day.
On the Earnings Calendar, we have 70 companies reporting. Stay on your toes this week there are a lot of reports on the calendar. Prepare, plan and always check reporting dates of companies you own and those you are thinking of buying.
Action Plan
Without question, Friday produced shocking bearishness breaking supports as traders ran for the exits ahead of the weekend. Swing traders are mostly positive people, and the vast majority only want trade long. As a result, when they see a huge move lower like we did Friday they naturally want to believe the selloff is over. They try to predict when the bounce will occur only to find out that the sellers have more to say. Much like this morning with the Dow Futures suggesting more than a 200 point gap down! Even when the selling does stop, keep in mind that it could just consolidate before moving lower. Consider the fact that Dow 25,000 needs a test as support.
Remember every day does not have to be traded to be successful. Wait for good quality signals and remember the market is now very emotional. Big morning gaps and intra-day reversals could be the new normal in the short-term.
Trade Wisely,
Doug
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Good morning team.
With XLE showing follow-through down I have purchased the FEB 78.5 Calls creating a credit spread. Then I closed the March 73 calls. Overall we still have an outstanding profit on the position.
Remember all trade ideas are for your evaluation and consideration.
No Edge
Increased volatility, big overnight gaps, and violent reversals are great for very fast intra-day traders. However, for the average retail swing trader, it means we have No Edge. Everything that seemed to be working so well just one week ago is not working now. That is the nature of the market. It’s always changing and often that change is violent. As a result, we as traders must recognize the change and quickly adapt or better yet just stand aside and protect our capital. This week should be proof of the fact that not every day is a good day to trade and that setting in cash is a good position. Eventually, all this wild emotional price action will come to an end, and cooler heads will prevail. The question is will you be ready to trade or chopped to pieces trying to trade with no edge?
On the Calendar
We get things going on the Economic Calendar today with the very important Employment Situation report at 8:30 AM Eastern. Consensus suggests nonfarm payrolls of 175,000 and an unemployment rate holding at a 17-year low of 4.1%. Average hourly wages are expected to increase 0.3% with the average workweek unchanged at 34.5 hours. Private payrolls are expected to increase 172,000 with manufacturing increasing by 18,000. At 10:00 AM both Consumer Sentiment and Factory Orders numbers release. Consensus suggests January Consumer Sentiment will come with a 95.0 reading. The Factory Orders index is expecting an increase of 1.5% according to consensus. We finish the week with two Fed Speakers at 1:30 PM and 3:30 PM.
We get a little break on the Earnings Calendar with only 46 companies reporting today. Oil will take center stage with CVX, XOM, and PSX reporting before the bell.
Action Plan
Everything was looking okay until we had an unfavorable economic report yesterday morning creating a sudden gap down. The bulls stepped filling the morning gap but failed to have enough strength to hold on to those gains by the end of the day. As I write this, the Dow Futures are pointing to a nasty gap lower of more than 200 points. I have been suggesting for some time now to prepare for increased volatility, but it’s still shocking to see the violence of these moves. The big overnight gaps in both directions can chop an account to pieces. I mentioned earlier this week to expect challenging price action and suggested new and inexperienced traders might want to watch from the sidelines. Sadly that was a correct call.
The Employment Situation numbers this morning have the potential to improve or make worse today’s open. Anything is possible. I think the wild price action, quick reversals, and overnight gaps could become the new normal at least for the short-term. Be very careful. Have a wonderful weekend everyone.
Trade Wisely,
Doug
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