Eventually, what you’re looking for, finds you…
Stock traders were on a mission to pick a bottom, it finally arrived yesterday afternoon.
The trading term I use in our Masters Program is “exhaustion.” This implies the buying or selling pressure has exhausted its power. The old-school trading lingo is “clean-up print.
This means a specialist or market-maker receives the end of a large order and negotiates a price for the entire block of stock. The key to remember with this type of trading scenario is that its most effective at the end of a trend, after a fast, momentum type move.
The chart below in CF is a good example.
How to Trade Exhaustion
Generally, if you see this type of volume spike, and parabolic price action, it means a short term to or bottom. This means you should tighten up a trailing stop-loss, to lock in profits (see chart of DAL to the left…$2 bounce after exhaustion on the 5 minute chart)
A key mistake is to blindly reverse sides. The correct time to make that trade is if you get another signal like we see on the daily chart of the SPY today (see chart below).
A “hammer” candlestick, which some call a bottom tail, after exhaustion, is what you’re looking for. Scroll down to see how we plan to trade the SPY today off this set of signals.
Stock Market Today: Map of the S&P 500
(click the map for a full view)
Top 25 Proprietary Trading Secrets
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Day Trading Game Plan: The SPY ETF Outlook
SPY price action finally gave us capitulation, along with a hammer candlestick. I will be looking to buy a lower open today for a day trade, as long as price stays above the open, buying the SPY will be a trade to consider. If it trades below the open, the short sale is back on.
(click the chart for a full view)
Stock Market Finds Short-Term Bottom 1-21-16
Pete’s Notes:
- Quite a few stocks showing double volume yesterday. Looks like a short-term bottom is in place.
- This means, like last Thursday, we will be faced with trading stocks long, that are in a down trend. This is a momentum trade. Book and trail profits.
Technical Analysis | Charts of Interest
CF | CF Industries Holdings, Inc.
CF is one of many stocks in a down trend that showed exhaustion volume yesterday. Along with a bottom tail candlestick, this stock is a potential bottom / change of trend. This does not mean it’s a long, or a stock to buy, it means the short-side probability is lower.
(click the chart for a full view)
Stocks to Trade 1-21-16
Short-Term Trading Momentum:
Positive the last 20 and 5 trading days | closed 2% higher from the open: ABBV, AR, EQT, GPOR, M, SAVE
Negative last 20 and 5 trading days | closed 2% lower from the open: mplx, dvn, etp, epd, vtr, hcn, schw, cop, aer, xom, cf, sndk, mbly, ir, dlph, amtd, gnc
Quarterly Order Flow:
Bullish Ideas ATR/Volume/Price: NEE, LULU, BXLT, EQT, O, D, ED, CPB, M, MCD, WMT, MYL, DG, DLTR
Bearish Ideas ATR/Volume/Price: mplx, dvn, etp, edp, lng, ibm, cop, aer, tif, lnc, hes, c, cf, mbly, fdx, ba, oxy, tsla, slb, pru, nfx, jpm, pxd, cof, bhi, lyb, stx, gs, ups, mpc, hfc, wdc, eog, apc, esrx, len, stt, bbby, bwa, unp, cern, nbl, cat, ual, jwn
20 Day Breakdown: cop, aer, xom, tif, lnc, hes, c, sndk, lvlt, fdx, ba, cvx, oxy, tsla, slb, sbux, hd, jpm, dlph, tgt, pxd, low, gs, ups, jnj, cci, ccl, hon, unp, nflx, ual
20 Day Breakout: M, EQT
2x Normal Volume: FB, NFLX, C, JPM, XOM, COP, CVX, SBUX, DAL, GILD, APC, IBM, ACE, UAL, MA, HD, CELG, EOG, HES, CCL, LOW, AVGO, GS, UNH, MAR, BA, AMGN, KMX, RCL, TIF, ACN, PRU, SAVE, CCI, LNC
Inside days: mchp, ed, aem, bby, fosl