in 24 hours I will be out of school for the summer, and I will be done with junior year. Now that is hard to believe, time flies.
The market had a harsh sell off today which confirmed my bearish bias from yesterday. Right now, I think it is a time to cover some shorts and look for a tactical long play. It is going to be very difficult to short after 3 days down and coming into some major support (160-161 in $SPY), and because of this I have three plans.
Plan #1 –
If, and this would be the best case scenario we were to get a huge gap down towards the 160 level I would be a buyer there and likely have great conviction with the trade. This type of set up is the best because you will likely see a counter trend rally all day and then potentially close green. This pattern is likely not going to happen though as too many people want it (haha).
Plan #2 –
We see a large gap up.. I would like sit on my hands until we saw confirmed strength/weakness on this play because even though it would take us out of unextended territory from the short side it would also put us in a position to squeeze all the left over shorts. If this happens, I would expect a lot of people to get frustrated and not much to happen all day. I do not think people are quite ready to rally alot again. We need to breathe.
Plan #3 –
We open flat, well this would leave the door open to alot of potential ideas and trades. However, one trade that sticks out to me is that we see a outside reversal candle. What I would look for is a open flat, fall below today’s lows, and then recover to close green. This pattern could lead to a bounce in the next day or so as well.
That is all the plans I am going through today. I am sure there are a hundred more scenarios I could talk about but that would take too long and would become repetitive.
I am still seeing breakouts fail all over the place and therefore it is still difficult to trust them. Still take them, but as day trades, not swing trades IMO. Once we hold higher or start to see a lot of nice charts we can go back to buying breakouts.
Have a good night. Summer tomorrow. Here are some charts –