Trend Following – Page 564 – Dave Landry on Trading

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Beware Of The Baby With A Poopy Diaper?

By Dave Landry | Uncategorized

Yesterday I wrote: “The market is overbought and due to correct. And, as pullback players, we will wait for that correction before looking to add on the long side. This is, provided of course, the trend begins to resume out of that pullback. Dang, I just gave away my entire methodology. Well, there are a few more details-so still make sure you buy my books—but if you understand what I just said, you’re well on your way. You’re welcome!”

And, yesterday the market began to correct. I had no idea that it would correct yesterday but I knew it was due.

The market tailed higher but came right back in to close poorly and well into the minus column.

As I said in the MIM, I’m sure the candle people are all excited about this. I’m not sure of the pattern–my candle books are hard at work under the one short-leg of my desk. ¬†If memory serves, I think it’s a baby with a poopy diaper, a wrestler with a fat ass, or a bird crapping on a wire. I dunno. One of those.

Me? It’s just one-day. One ugly day, but one day nonetheless.

Admittedly, in Western chart terms this does form a bearish outside day down. Again though, it is just one day. Have I said that yet?

Hey, if it went up every day, then everyone would be doing it.

The fake out to new highs has likely attracted some “Johnny-come-latelys.” And, these players are going to be the first to run for the door. The futures are getting creamed pre-market so they are likely already have their hand on the knob. The ¬†aforementioned poopy diaper thing has also likely attracted some eager shorts. IF the market reverses to turn back up, we should be able to take advantage of the predicament of these traders. The Johnnys will be forced back in or have to be willing to be left behind and the shorts will be forced to cover. This is similar in spirit to my TKO pattern. Email me if you’re too cheap to buy my books and I’ll give you the pattern.

So what do we do? For the nimble looking fire off a trade just for S&Gs, look to play an opening gap reversal (OGRe) in the index shares. As I preach, if you don’t know that that is, get educated. I have some free articles on trading gaps on my website. So, check ’em out and watch them unfold for a few times until you think you get the hang of it. I think the best advice is to wait for entries on new positions. If this does turn out to be the mother-of-all tops, then that in and of itself might keep you out of new trouble. As usual, honor your stops on existing positions just in case.

I have a lot more to say but I’ll never get it all in my publishing deadline—so come to the chart show later today if you’re not busy saving lives, building buildings, repairing automatic transmissions, or doing other great things.

Like the baby, futures are crappy pre-market.

Best of luck with your trading today!



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