Play The Hand That Is Dealt (And A Gift Horse)

Random Thoughts

The market gapped higher for a strong start but quickly fizzled. This action formed a very nice Opening Gap REversal (OGRE). See yesterday’s column https://www.davelandry.com/index.php/a-new-day-or-the-end-of-the-world/ for more on that. You’re welcome.

I’m not a big fan of day trading but when an intra-day position trade like an OGRE comes along, it is a gift horse. This is especially true when the reversal is back in the direction of the trend (i.e. pullback like). This action creates a fairly high reward to risk trade. You’re not going to get rich but you can make a nice quick profit—much better than a poke in the eye. I’ll walk you through this one in Thursday’s chart show.

As a general rule, bull markets start weak but end strong and bear markets start strong but end weak. So, even though the market ended higher net net, overall, I think the fact that the market couldn’t hold on to most of its gains scores as a negative.

In the Ps, the Bowtie from all-time highs remains intact. See recent commentaries (use the calendar on the upper right of this page). As I preach, not all Bowties (or other transitional patterns) off of all-time highs will turn into a major top but every major top will have a Bowtie (or other transitional patterns). Therefore, it pays to pay attention. As you often hear me say when it comes to transitions off of all-time highs: you might want to write that down.

The Quack still looks better on a relative strength basis. However, it has traded sideways at best for nearly 2 months.

Everything mentioned recently seems to continue to play out—albeit in slow motion. I am seeing more and more shorts beginning to set up and fewer longs. And, of those longs nearly all are in the Gold and Silver stocks. The great thing about these stocks is that they can trade contra to the overall market.

So what do we do? My preaching remains the same. “They” are not going make it easy on us. Even though the market looks like it is headed lower, it is not going to be a straight shot down. I would continue to avoid any drastic decisions but definitely honor your stops on existing longs just in case. And, unless the stock can trade contra to the overall market (like the aforementioned Gold & Silver stocks), I’d avoid the long side unless you really really really like a setup. I would continue to look to fire off a short or two. I’d rather get long and high five each other any day of the week than short. In markets though, you need to play the hand that’s dealt.

Best of luck with your trading today!

Dave