Stock Market Bears Come Out of Hibernation | August 21

A few of the popular high-beta stocks were showing signs of cracking the last ten days. Price action and volume weren’t in sync. Well, they fell through the ice yesterday, in a big way.

Monster trading volume across the board was a short-sellers paradise. So what is the trade for today. Many of the stocks that got hit with selling this week are coming into support so you need to take a good look at reward potential, especially on a lower open. You don’t want to risk $2, to make $2.25.

Good chance of sideways price action today after the opening hour.

Stock Market Today: Map of the S&P 500

(click the map for a full view)

Stock Market Bears

Day Trading Game Plan: The SPY ETF Chart

FOMC reaction or not, that was real selling yesterday. Over 350 million shares the last 2 days. As of 7:30 am we are looking at a lower open. Keep an eye on the $TICK and $TRIN readings for clues. If we push lower but the $TICK does not reach at least -700, the selling may be exhausted.

(click the chart for a full view)

Stock Market Bears

Stocks to Trade | Friday August 21, 2015

Pete’s Notes:

  • A lower open should be a solid buy in quite a few stocks today.
  • Market internals will be a key to gauge today’s trading.

Charts in Focus

Activision Blizzard Inc. ATVI

ATVI hit new 52 week highs this week and has an orderly pull-back to the 20ema and a level that was support (the $28 area). A lower open today would be a solid buying idea. Keep an eye on the other stocks in the industry such as GME and TTWO for confirmation.

(click the chart for a full view)

stock market bears

Earnings in play today > 1M avg shares: DE, FL

Bullish Ideas ATR/Volume/Price: POST, SKX, W, HLF, AAP, HD, ALK, SYK, LMT, SRPT, LLY>89, VLO, DHI

Bearish Ideas ATR/Volume/Price: yelp, viab, gmcr, qrvo, juno, bidu, myl, swks, uri, baba, wpz, dvn, isis, wynn, kss, rrc, cvx, cof, paa, lyb, bhi, hot, lng, mar, unp, adi, mmm, sndk, utx, cam, etp

Weak Stock Weak Close: viab, twtr, swks, twx, baba, wpz, dvn, isis, bx, scty, wynn, cbs, ben, fox, clr, bhi, avgo, swft, lng, adi, nrg, sndk, jci, ca, cam, txn, se, trn, etp

Strong Stock Weak Close: BXLT, MAS, NVDA, LOW, TMUS, ATVI, HOLX, TOL, HD, TSO, ARMK, PGR

Weak Stock Strong Close: gmcr, sfm, vtr

Strong Stock Strong Close:

20 day Breakdown: bac, mu, fb, dis, rad, baba, ms, twx, txn, cbs, bx, unp, sndk, disca, crm, ba, bbt, bhi, adi, lng, swft, cnq, dvn, ea, ccl, ctrp, wetf, cien, acn, mur

20 Day Breakout: ABX, AU, AUY,

2x Normal Volume: DIS, MRK, NTAP, TWX, AEO, LLY, CBS, BX, MBLY, SNDK, YUM, CRM, KKR, BA, ADI, SWFT, KSS, AEM, BEN, CMA

Watch List Longs: TJX, HD, MCD, TOL, LEN

Watch List Short: cop, kss, cvx, bhi, bmy, hal, all, xom, wmt, bby, wynn, dow, hpq, dd, sndk, qcom, klac, txn, intc, lltc,

Inside days: tgt, rax, eog, wmt, dhi, paa, kors, ally, rrc, altr, bxlt

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Passion4Trading Reply

Pete– the much touted generality rules of “Must have 1:2 or better R:R” and “Avoid setups that only offer 1:1 R:R” are ones that I USED TO FOLLOW RELIGIOUSLY for years.

However I eventually discovered a key element that was missing that in reality– completely debunks the notion that odds of success go down considerably if these rules are violated. It all lies within TRADE MANAGEMENT…first and foremost… combined with a universal trading truth that what drives future stock moves lie within PROBABILITY CONDITIONS.

Think about any chart pattern…any support and resistance level… any roadblock… on any time frame… any symbol– the plain truth of the matter is to a very high degree of probability—when patterns fulfill and when roadblocks are taken out and follow thru occurs — THERE ARE CONDITIONS THAT EXISTED THAT INDICATED HIGH ODDS THAT A MOVE WAS GOING TO OCCUR…AND OCCUR FAST. In contrast– think about all the times a chart pattern has failed…support and resistance levels were honored..roadblocks halted a move etc– in the majority of cases we can go back and identify why conditions didnt exist to allow for follow thru. ODDS WERE POOR.

With these concepts in mind– it is VERY ACHIEVABLE to generate positive expectancy stats that reflect win rates and payoff ratios that completely fly in the face of the “low R:R setup”…. and go on to produce moves well in excess of the perceived “poor risk to reward opportunity”.

    Passion4Trading Reply

    So in summary with my first comment– what drives a move to defy R:R profiles that appear to be subpar– all lies within ODDS CONDITIONS.

    If we rely simply on odds however– ODDS OF SUCCESS GO WAAAAAAAY DOWN.

    Why? Because the are no guarantees…and because odds can get trumped…and can get trumped often based on the random distribution of wins and losses principle within statistics. In addition… odds are dynamic…and at any given time the thesis can change in a trade.

    So this is where TRADE MANAGEMENT IS ULTIMATELY WHAT WILL ENSURE SUCCESS. It is what makes or breaks odds and probabilities…. and without it– the high A+ trade setup will ALWAYS be subject to the “weakest link” inevitability…that being–“A+ setups are only as good as how they are managed.”

    So– with this in mind– think about how powerful the Risk to Reward profile is DYNAMICALLY CHANGED once a move takes place in a trade– WHEN AN ORIGINAL STOP LOSS LOCATION IS ADJUSTED. This is where it all is Pete.

    If we think in terms of ” how much profit am I going to make on this trade”…. we are setting ourselves up for failure. But if we think about “managing risk and minimizing loss” as our #1 GOAL… PROFITS WILL FOLLOW… THEY ALWAYS DO.

    So in a nutshell- I see it all the time– that a 1:1 R:R profile easily can become RISK FREE when odds and trade management are properly applied.

      Passion4Trading Reply

      So in your example– if a stock that closed strong relative to the market on Thursday… comes into a level of support on Friday– in a general market that has a down open that drove that stock to that level of support– yet that strong stock clearly shows relative strength nonetheless from the open vs the market.. and at the same time the market internals show signs of a potential reversal… it is IRRELEVANT that the first supply level in the stock is 1 point away with risk if wrong 1. Because on the EXPECTED INITIAL MOVE THAT PROBABILITIES PROVIDE- cutting that initial stop in half JUST TURNED A 1:1 INTO A 1:2 R:R!

      And in the event that thesis changes while in the trade– most cases and A+ Odds Setup provides ample time to tighten up risk to a new area proven wrong– WHICH AGAIN– AGAIN…. turns that original 1:1 R:R into 1:2 R:R PROFILE.

      That’s the end of my rant. Have a great weekend Pete.

        Pete Renzulli Reply

        you too.

        Your analysis is very passionate. Let me know if you would like to submit an educational blog post once per week.
        As long as it is educational and not confrontational I think the community would benefit from your knowledge.

        Have a nice weekend.

    Pete Renzulli Reply

    thank you.
    very insightful comments

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