Thursday, March 01, 2007

Daytrading on a huge you have the stones for this???

We have talked in the past about what a person should look at before taking the first bar setup....amoung these are how much of a gap can there be and still have a valid trade setup, then what kind of range on the first can I have before passing on the setup. Well, on the 27th was a classic day...something we haven't seen for a while and I would guess that a lot of newbies have never seen.

U.S. stock indexes plunged Tuesday on the heels of a sharp selloff in Shanghai, creating a string of five straight lower closes for the first time in over three years. The S&P and Dow both lost over 3% while the Nasdaq ended down over 4%. Market internals were massively lopsided, with many measurements approaching record territory. Volume associated with declining issues accounted for 99% of total volume on the big board, the highest reading since the '87 crash. Other gauges hit similarly extreme levels - NYSE breadth was 6:1 negative, NASDAQ breadth was 10:1 negative, NYSE TRIN closed over 15 (a record.)

It's interesting to note that a 3% down day for the S&P isn't as rare as you might expect. There have been a total of sixteen days since 2000 in which the S&P closed down 3% or more, fourteen of which led to a higher S&P close within the next two sessions. Looking back at the last thirty 3% down days stretching back to late '87, twenty-six were followed by a higher SPX close within two sessions.

Of course, a history lesson is fine....but I only care if it makes me money......we had a 15 point gap on Tuesday to greet us with, but the range on the first bar was around 2 points and that is near a normal opening bar range isn't? At point "A" is where we have talked about doing something. You could just move to BE, you could cover the trade, you could take some off and move to BE or you could take some off and leave the stop just above the opening bar and hang on for your dear life.

The market recycles back up to point "B" and doesn't reach the overbought area before turning down but when it reaches point "C" again you should think about some kinda management style. When the high of the last bar is taken out (red bars) is what I like to use, but you can certainly find something you like better.

When the market reached point "D" and the stoch turned down into point "E" again I would just move my stop on down to above the point "D" pivot and keep riding the train......of course again it was stopped out. Do I care all that much......HECK NO, just give me another trade setup and I will give it a shot....simple as that!!!

No comments: