09-28-14 Trade Plan

The indices are still chopping around and small caps are under performing pretty bad.  The Dow failed in trying to lead the market higher but is still holding up better than the S&P and the NASDAQ is holding up better than all of them.  So that keeps my focus on the NASDAQ and the Dow.  But no matter what is looking better on a relative basis I still need to see higher highs and lows on an intraday trend to be more aggressive in taking positions and looking for leading moves.  We don't have that yet, let's take a look at the 130m charts.


First thing I see looking at the DIA is a failed breakout that tried to get back above the breakout level and failed again.  Now putting in lower highs and lows.  Looking at QQQ it's the same thing but a different scenario.  The consolidation from 8/25-9/12 created a channel, price broke down from that channel, tried to reclaim it, broken down again, tried to reclaim it again, and failed again creating lower highs and lows/chop.  IWM is just getting hammered, in a downtrend but coming into $110 support.  It may take some patience here for price to get sorted out and it could also take some more downside.  Who knows, but I know that trading the downside is going against the grain on longer time frames and I know that the indices aren't set up for high probability upside yet.  I'd rather just be patient and wait for a better market environment to be spread out in stocks and indices.

With all that said here's the stocks I'm watching.  Given the condition of the indices right now I'm only taking and focusing on the very best setups.  Some of these that have my attention are FB, NKE, MU, CELG, GILD, & CF.  Nike and Micron are potential gap up continuation trades, watch the low of Friday's candle to hold.

Understand that how much you worry about the indices depends entirely on your time frame and how correlated the stocks you trade are to the indices.  I have a relatively short time frame 1-15 days and trade highly correlated, highly active stocks so that is why I put a lot of focus on what's going on in the averages.  Different environment's in the indices will create different opportunities in highly correlated stocks.  For example, sharp moves up in the indices are driven by leading moves and also trigger new moves along the way.  A market slowly grinding higher will weed out weak stocks by having large down moves in the stock on down days and vise versa on up days.  In effect creating swing highs and lows.  Intraday trends make this a lot easier and more efficient to interpret.  Market in a 65m trend, stock in a 30m trend.  That stock is in a leading move for the time being.  Sometimes leading moves don't care about the indices and that's what I mean when I say I'm only focusing on the very best setups.  I don't want to spread myself thin in an environment without the wind at my back.  None of this matters without individual risk management though.  Probabilities and risk management are two different topics.  Thanks for reading

Trade well,
-Michael