Thursday, May 23, 2013

Thursday evening

Is it over?

It was a wild day from a pre-market view of the DJIA futures down more than 135 points to a gain of more than 40 points before closing down a dozen.  Are we due for a pullback?  Sure.  Has it started?  Maybe but for the last 7 months it has been right to buy the dips and the Fed walked back some of the scarier language from yesterday.  At least that's what John Hilsenrath attempted to do during the FM Halftime show.

Opinions vary on where prices go now.  That's why they ring the bell 5 days a week.

Thursday afternoon


As jojo1480 said late yesterday, this is like Mr. Toad's Wild Ride.  If it is moving too fast or you just don't have a feel for it now, there is nothing wrong with resting on the sidelines.  Things will settle out and you will be able to see a trend again.  It may be down or it may be up.  As long as you are in sync with it the direction is less important.

Thursday morning

Gator's Chart of the Day: GME
(Click chart for better view)
By the time the market opens this may be ancient history but maybe not. Gamestop is reporting before the bell but it has already had a 10% sell off this week on high volume so the bad news could already be in the stock.  Not to mention there should still be significant short interest (Finviz shows 33.4% of the float is short) so any hint of less bad than expected could pop it higher.  The stochastic is diving hard but has not yet reached oversold (20) territory.

The Trade
If it sets up this would be a 59er.  It could be a gap up and go or it could be a gap down and bounce (my favorite.)  If it is the latter then here's the plan.

  1. Using a 1 minute (super aggressive) or 3 minute (better idea) or 5 minute (you may miss a great entry) buy as the first green candle is printed.
  2. Place your stop under the low of the day.
  3. If the stock is still moving up with volume add aggressively and fill your position for the ride up.
  4. Add stops as you add to your position.  This is a winning trade so don't let it turn into a loser.
  5. If you hold later than 11:30 you should probably take a partial as a lunchtime pullback is reasonable.
Remember, do not force a trade.  This is an event and it could go either way.  You are trading (or not) the reaction.