Follow Through?

It looks like it on paper, but I don't see any high quality setups...best to wait for more of a confirmation before becoming super-bullish....

Imminent Bounce

Friday's late day save is hinting towards a short term bounce. It may be powerful enough to keep the uptrend going, but it is unknown for how long. The last few weeks did their part to shake short term traders and investors out of their positions and now, dip buyers have stepped in to pick up the mess that was left in the wake of the destruction. Unfortunately there are very few stocks left that are worth buying, but that may change depending on this weeks action. For now, I believe APPA was a good buy. CNLG looked like a good buy but it turned out to be a dud that cost me a lousy 19% loss. I held on for too long hoping for a bounce which never came. Another stock that I remain positive on is SPU, even though it is down from my initial buy. Even HPJ and ONP may give us decent bounces. Still, I will be on the lookout for fresh breakouts with promising catalysts. These new stocks which may breakout will be the next leaders in the upcoming uptrend. These will be the stocks that will have a high probability of giving us handsome returns.

New Trades

New Buys: APPA (in at 1.58)

Top Stocks for Today

Top Stocks: CNLG, ISSI, SBGI

New Buys: CNLG (in at 3.79, posted on StockRaider, my twitter page for day trading), ISSI (in at 6.29), SBGI (in at 5.51)

Update: CNLG sold for a loss...failed trade

High/Low VIX Trading Strategies

Now that the VIX has begun to show momentum, it is prudent that one should switch their trading style to a shorter term holding strategy. The higher the VIX goes, the shorter term your holding period should become. Back in 2008 with the VIX at astronomical levels, only short term trades had a high probability of giving decent gains. I remember that if one didn't sell their trades in a day or two, they would get pummelled the next day. So for high VIX market, do short term trades on stocks breaking out and showing strength. Also note that in high distress time periods, most stocks making significant moves are lower quality, speculative stocks.

Once the VIX tops out and drifts lower, we tend to find more higher quality stocks breaking out. Also, a lower VIX allows us to hold positions for longer time periods which is key in reaping high returns from trades.

Tug of War

You can compare it to a tug of war match or a yo-yo. Regardless of its comparison, it is becoming increasingly difficult to know what side one should sit on. While the obvious side says the market is heading lower, another approach would be to sit on the side and wait for a clearer trend to develop. I feel as if I still have a bullish bias. Maybe I am wrong. But for now, I am sticking to it. I am mostly in cash at this point and just grabbing small positions here and there.

Stocks showing strength: HDSN, LBY, PEIX, QELP, SMTX, SPU

Long term buy: INTT, WWIN, WWVY

Bouncing: GFRE, ONP (?)

Thoughts on Current Down Trend

Looking at the past index charts, the current down trend that we are experiencing is nothing spectacular and not something that is out of the ordinary. It reminds me of the July decline that we experienced months ago. Now is a good time to either hang tight or sit on the side with cash. Most likely, short positions will not follow through, so do not waste your time as of yet. Short term traders may have been able to grab some profits by shorting early on the temporary top and anyone who shorted the futures probably made a respectable gain, yet I still remain stubbornly bullish. I may be wrong, but I believe that we are just taking a short break before we're set for the next leg up. I will be constantly looking for strong moves in stocks that can lead to longer term trades (ala KIRK, KS, DTG, F, etc). I would pay extra attention to SPU as it has set itself up like HPJ did months ago.

note: also, HDSN has potential...

The first step is to look for support levels. The 10K level on the DJIA seems like a good place to start. So step one is to sit on the sidelines in cash and watch for a support level to form. While doing this, monitor stocks that are breaking out, making new highs or showing strength on high volume. Look for a brief period of consolidation. Even if market bounces from this level, just watch. You will want the market to post a follow through. In addition, you will want to see stocks making strong breakouts as well. I have seen markets bounce but no real follow through in individual stocks. That would be considered a warning sign that the market is not ready to climb back up.

Slightly Oversold

This is the point where the market becomes slightly oversold. Unless some catastrophic news hits the market, we should bounce from here. Anymore downside from this point on and the primary trend will be in danger of changing to bearish.

New Buy Candidates: CNXT, HDSN, ISRG, LBY, TLX

New Buys: SPU (in at 6.78)

Hold: ISR (decided to give it some more time...small position, so no big deal)

Update: Looks like the market has more room to the upside. My initial thoughts on shorting the market were correct. I may sit on the sidelines until we actually show some support on the charts.