Over the last few weeks I’ve been waiting for a market correction.. and I haven’t been alone. The July move was definitely getting top heavy and quickly showed signs of slowing once we stampeded into August on the backs of bulls. Today, finally, the market gave back some of July’s profits. Is there more to come? Well, in my opinion, yes. But, I try to focus on one day at a time – play what is given to me and not attempt to predict the future. If I had a crystal ball, I would be retired amongst other things I can’t mention here.
Asian markets foreshadowed the gap-down this morning, so there was no surprise there. As with most gaps at the open, I sat on my hands. More often than not, there are back-filling opportunities before lunch if you have the time to sift through the overreactions and watch the plays develop. I didn’t have that kind of time today. If you’re like me and have a day job, you may only be able to visit the charts a few times during trading hours. So, how did I get involved today?
- Watched the gap down. Was there a bottom being put in? Panic selling? Quick rebound?
- Checked out the tweets. Scanned for the action and the sentiment.
- Went through the stocks on my Watch List (all were long setups). Obviously, they all gapped down (ARIA did manage to gap up). The objective here was to confirm which long setups stayed in their original pattern despite the drop. In other words, did any drop below support trendlines, etc. The charts that stayed technically sound remained on my intraday list for possible swings or scalps.
- I did a few quick sector scans to look for any strength.. nothin. So, the obvious question was ‘why force the issue’? Yes, I could look for stocks that tanked at the open and were regaining volume and strength into the recovery back to previous day’s close. However, it was time to go to work, so playing a somewhat passive role was the right approach for me. At this point, I was armed with the stocks that looked the most promising from my morning Watch List review.
- I came back during lunch and looked for many of the same things from earlier in the day. The market hadn’t moved – very tight trading range.
- Again, I didn’t want to be overly active when watching long trades with the market very down. I’m usually a momentum trader and am looking for the technical setups to be satisfied before I go long. There wasn’t going to be much of this happening today.
- Quick look at my Watch List showed 2 stocks worth digging into – ARIA (still up from the morning, but stuck there) and OCLR. OCLR, despite low volume, was looking pretty good and the key for me was the .70 horizontal resistance range. As it moved through, I went long (small position). The intraday chart showed good volume on this move, so I was confident enough to take a chance on a long swing in a market down over 160 points.
- That’s it. Nothing else looked good from the Watch List and I wasn’t going to go hunting ( I had to get back to my day job).
- When I could, I watched the sectors, overall volume and general market strength. OCLR didn’t finish extremely strong and I’m actually down a penny as we speak. However, I’m holding overnight and will treat this as a swing trade with .70 range as support. I will not hold much below… today could have been a false breakout and I’m not about to marry a stock just to try and prove myself right and watch my position poop on itself.
- Sentiment – still bullish OCLR.
Keeping trading simple – that’s how I manage a day job, a passion for trading, and those other things like eating and sleeping. This evening, I’ll take a look at my Watch List (add or remove) and get ready for tomorrow. Thus is the circle of life.
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