Weak bounce

The markets looked like they were poised for a strong bounce early this morning but fizzled out fairly quickly. None of the indices could even muster a 1% gain today which doesn't bode well for bulls. I took opportunity to reduce exposure in some positions, but I also started to put on some guerilla type trades on as well. These are pseudo daytrades, lasting anywhere from intraday to 2 days. I don't know if the markets will continue this dead cat bounce or rollover right here so I am preparing for both. Ideally, we either continue bouncing higher, or have at least one more narrow range day in order to allow for less risky shorting.

Since I am preparing for two scenarios, I am going to highlight what I am looking for in individual equities.

The first play is if there is more left to this bounce. I am looking for stocks that are on their lower bollinger bands with oversold indicators. I then look for a narrow range or hammer type candle that I can use to trade off. FDO below is a good example. It is clearly oversold, and had a nice narrow range day today. If the general market is behaving appropriately, and FDO trades above todays high, then I think the odds favor a long position. The target on these types of trades is fairly aggresive, near the 9ema for a partial sell and middle band to close the position. This is a little risky in this environment, but the tight stop may make up for it. This type of play should not be treated as anything other then a long scalp.

The second play is to hope for some consolidation in order to allow weak stocks to catch up to declining moving averages. This is more of a swing entry, depending on the market environment. With the indices oversold already, I will be looking to keep these fairly tight as well. AEOS is a good example of a stock that is retracing it's way higher to declining moving averages. It is also below a trendline that has held for months. In an ideal world, it would trade sideways to higher for a few more days.

One thing to keep in mind is that I'm putting these out there as ideal scenario type trades, and more then likely, the market will not be so easy to follow. If the opportunity is not present, then I will sit on my hands. I will wait for the dust to settle before commiting any longer term money to any positions.

Good Luck,

DT