Rookie traders can’t spot it, but it’s right in front of you…
Short-covering [related video] is a fast, momentum move higher, after a prolonged down trend. Short-sellers have identified a spot they NEED to get out, plus new buyers of the stock now want to get in, so they buy.
You now have two forces bidding stocks up.
New buying during a down trend occurs as prices decline. This is known as accumulation.
Knowing the difference is important, because it tells a smart trader whether to sell-short the next pause after the rally. Or to be a buyer.
Scroll down and look at the chart of the SPY on the ten minute chart and you see what I mean.
Pete’s Day Trading Notes:
- Plenty of oversold stocks. The SPY is not, has further room to the downside.
- I still like FB and AMZN long, of those stocks beaten down the last week.
- Trading the open is a must for day traders right now. The five minute breakout has produced some nice winners this month.
Stock Market Today: Map of the S&P 500
(click the map for a full view)
–> Top 25 Proprietary Trading Secrets
Short-Covering Rally Bumps Oversold Stocks
With the USD in general retreat and risk-off dominating the stock markets, the demand for haven-assets such as silver and gold has increased.
Shares of GoPro Inc GPRO were trading higher by more than 4.4 percent early Monday. An article on Barron’s (dated February 6) detailed several companies that may be interested in acquiring the action camera maker.
Despite the large decline in GoPro’s stock, Barron’s suggested that GoPro still has “some financial cushion to regain its footing” as the company holds no debt and boasts $474 million in cash on the balance sheet and that its enterprise value is just under $1 billion.
“Don’t be a hero,” one strategist warns.
— CNBC Now (@CNBCnow) February 8, 2016
Chart Reading the SPY ETF
SPY hammer candlestick created by short-covering gives no clues. Price action still pointing down with volume. A good chance we see sideways price action in the indices today.
(click the chart for a full view)
Technical Analysis | Charts of Interest
$HD oversold and capitulation volume at support, looking for a spot to bid for a swing trade.
(click the chart for a full view)
Stocks to Trade 2-9-16
Short-Term Trading Momentum:
Positive the last 20 and 5 trading days | closed 2% higher from the open: JWN, TSN, CVX, UPS, AR, PG, DO, XOM, UNP, COG, ETN, SE
Negative last 20 and 5 trading days | closed 2% lower from the open: splk, now, nxpi, tsla, wdc, aer, crm, mbly, epd, lnc, cf, ua, endp, nwl, atvi, adsk, adbe, vrtx, v, c, akam, car, aet, mpc, tmus, rcl, gs, swks, tso, met, fis, hog, vlo, hcn, hd, cof, cvs, tap, low, pru, dg,
Quarterly Order Flow:
Bullish Stocks to Trade: TSN, JNJ, XOM, CAM, FAST, NEE, MMM, PM, WMT, RTN, KORS
Bearish Stocks to Trade: lnkd, now, splk, mbly, mpc, aer, lng, tso, tsla, vrtx, wdc, nflx, crm, lnc, uri, vlo, adsk, atvi, wfc, c, expe, amzn, mck, cf, axp, luv, kss, adbe, dvn, nwl, akam, ual, ma, aal, met, teva, swks, aet, pru, low, gild, len, ctxs, tel, hd, ba, wba, endp, ea, gs, hog, v, nke, nbl, pnc, dis, ua, amgn, utx, ctsh, cvs, acn,
20 Day Breakdown: splk, lvlt, tsla, wdc, aer, ctsh, crm, ms, lnc, nwl, atvi, lbtya, lng, adbe, v, c, sti, rcl, gs, nvda, hbi, tso, vlo, acn, hd, dhi, nke, cvs, tap, ftnt, low, teva, wfc, psx, ma, kr, aig
20 Day Breakout: JWN, TSN, NEM, UPS, AR, PG, ED, XOM, COG, ETN, SE, WEC, MMC, RRC, CMCSA, ALL, CMI
2x Normal Volume: FB, V, CMCSA, SBUX, NKE, CRM, MPC, ATVI, TXN, HES, LNKD, ADBE, CTSH, CCL, TSN, TSLA, GS, UA, TOT, PSX, RCL, ACN, NOW, SPLK, GRUB, TAP, LVLT, FIS
Inside days: lnkd, abc, rtn, mat, urbn, xon, bhp, ppc