As markets pullback and/or selloff, it's normal to see many stocks loose levels of support. Fear starts ramping and people are willing to sell out at any price to ease the pain of holding on to something that is dropping in value. However, after pullback phases are over, there's a rebuilding phase where stocks take a few days to rebuild their broken bases or patterns. This is very healthy however, it can be very tricky to trade thru it. The action tends to be very sloppy and choppy. Lots of STOP AND GO action. I have found it much less stressful to just wait and allow the bulls and bears to fight it and then jump on to the winning side once the REAL move starts to emerge.
The 'bounce' we are seeing today thus far in stocks looks of the 'dead cat' bounce variety. After yesterday's high volume selloff, it's normal to see some stocks trying to bounce some here. I am not going to chase anything here. It is much better to chill for a bit and see how the action unfolds. We broke many layers of support yesterday, these levels of support have now become RESISTANCE. So if we move higher from here, these over head resistance levels will be very tough to overcome and will require some time.
Attached is the NYMO chart: Which shows that we are currently at very oversold levels so a bounce here is very possible. Remains to be seen.
Bottomline: This market just needs time! So exercise some patience. Use smaller size if you decide to trade next few days.
2 comments:
Good advice Stewie; it's definitely risky to be trading in the middle of a correction. Thank yo for taking the time to spell it out for us.
my pleasure. good luck sam!
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