05-03-15 Trade Plan

NASDAQ failed to hold the gap low/$110 and that told me this wasn't a typical breakout as most of the time in recent history buyers would've held the relevant support with ease and continued.  Price moving lower from there wasn't something I was interested in trading as we still had intraday and daily uptrends, so this entire week ended up being one of sitting back doing nothing as far as new positions were concerned in equities.  Buyers still have a daily trend to work with in the NASDAQ while the Russell is coming back into $120/YTD break even support area.  So far buyers are stepping in protecting these areas, and the weekly charts are still looking good.


I really don't know what else to say about this market right now, so I'll just think out loud on this one.  It's possible that price action starts moving in a different way.  Maybe rather than straight up after a nice setup, we do this 2 steps forward 1 step back kind of thing on a daily time frame, which screams two sided market even with a daily uptrend.  The big picture fact remains that buyers are up on the year with daily and weekly trends behind them so there's no reason to get bearish or trade swing short on the indices.  But we can acknowledge that buyers have been waiting for oversold conditions (RSI 30 as opposed to RSI 50) to really step in as you can see on this chart, looking at the 65m because it's still the relevant intraday trend right now.  That could be a pattern we start to see more of with the focus on daily chart trend, but these are just thoughts.

What I do know is how to manage risk so no matter what the price action ends up doing the risk/reward is going to be good and the trade will be in a trend.  If adapting to new market conditions is what needs to be done, then that's what will happen.  But the fundamental rules of position sizing, risk management, and pushing winners aren't going anywhere.

The watch list returned to the normal size again as names were filtered out through bad price action.  Some of the better looking names I'm watching this week are ADBE, EBAY, IBM, TASR, PCLN, & GILD.  Hopefully if buyers retain control on the indices we get some new setups and I'll tweet them out if that happens.  My hold time is still short term 1-5 days.

One more thing I wanted to bring up.  There is really some insane price action going on right now in some areas.  Like TWTR and LNKD getting crushed on earnings.  ESRX spazzing out after the earnings the past few days and CRM with the huge spike up out of the blue.  Those were watch list names too with the exception of TWTR.  That's why having a plan and keeping track of earnings dates is so important, you don't want to be in that not knowing what to do or get caught off guard because you weren't paying attention to earnings.  Anyway I think that's enough rambling for one post, thanks for reading.

-Michael