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If You Shorted – Learn From This
www.oneoption.com
Yesterday I told you not to short this market.
PRE-OPEN MARKET COMMENTS FRIDAY – I don’t really have much to add to my comments from earlier in the week. The market is in a gradual up trend and major news is pending next week. Buy dips.
We can’t be aggressively long because we don’t have the momentum. The last market high was a marginal new high with tiny bodied candles and light volume. We have major news pending and we knew that two weeks ago. There was no reason to expect heavy follow through buying. Asset Managers were not going to chase, but they would buy dips. That’s what we are doing.
If you took longs the last two weeks, they sat idle and many lost their strength. If you bought weekly ATM call debit spreads, they died on the vine. Those set backs and soft price action created doubt. “The market looks weak and maybe I should be shorting.” A bearish trend day reinforces those thoughts. You aren’t making money waiting for dips and you need to turn that ship around. I know the temptations you are experiencing… I’ve been through them. You have to purge these thoughts and most traders can’t do this.
The long side is the only place to be. We have to wait for our window and we are likely to have one today. The money you didn’t make the last two weeks won’t be made today. There is simply not enough momentum for us to get aggressive and we should still expect light trading. We also don’t want to chase a gap up. If you have been setting alerts, you are going to see some nice opportunities today. The gap up this morning is going to trigger many alerts. Use Alert History to view them all. You want previous breakouts to have been preserved. Any dip should be minor and the stock should have retained its relative strength. These stocks need to be through the previous high and ideally, they could be making a new 5-day high on good volume. You will make good money today, but not enough to offset dull trading conditions the last few weeks.
If you shorted this week, you will be scrambling to cover those trades today. What’s worse than not making money is losing money. Remember the price action this week and learn this lesson.
You opportunity to make money is coming in the next two weeks and it will last through year end.
Overseas markets were pretty flat so there is not much of a tailwind. We want the bid check this morning to be brief and wimpy with most of the gap up preserved. The high from yesterday should be preserved and we are in the gap from Wednesday.
Support is at AVWAPQ and resistance is at the all-time high.
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