3 Bounce Entries For SPY

While SPY is oversold, I would like to see more weakness before entering long based on oversold conditions. The chart below shows three great bounce entries:

Charts: AMLN, BEAV, WYNN, BHP

I entered four positions today, 3 shorts and one long. My market bias has turned bearish with recent distribution (price down stong oh high volume) on SPY.

WYNN is showing signs of topping, though it is stronger than the market. Recent volatility and stronger volume to the down side make this an attractive "anticipatory short" with low risk if stopped out.






















BHP is an oversold bounce setup that is nearing support. Note that I am bearish on this stock and only playing a potential bounce. Stop is under the February low (close).

























AMLN: Bear flag under the 50 day moving average.






















BEAV: Break of 50 day moving average, which acts as uptrend line.

Today's Trade: PCU

I entered PCU as an oversold bounce play as it falls to support.

Oversold Bounce Setup: GLD

My recent GLD entry was based on the oversold bounce setup. I only took a 1/3 position today, and will add to it if GLD nears the 50 day moving average, which would offer me a better risk ratio.

GS Nearing Bounce Level

GS is oversold and nearing a strong area of support. If the stock drops a few more points today, an oversold bounce entry would provide a low risk trade.

Today's Entry: JEC

I went long JEC today as an oversold bounce setup. Stop is fairly tight.

Trade: SDS

I entered SDS today. It is extremely oversold and RSI shows a positive divergence. The last 3 similar states have lead to decent, tradeable bounces.

Anatomy of a Successful SPY Trade - Moving Average Oversold Bounce Setup

This setup was given to Trade Report subscribers. SPY was marked as a "bounce trade" setup on Friday as it neared the 50 day moving average and became short term oversold using stochastics as the oversold indicator. I entered Monday morning on confirmation.

The stop was set under the 50 day moving average, with an initial target of $106--giving 3:1 reward to ratio.

The stock is now near resistance. Notice the distributive volume pattern. This suggests failure at resistance. Entry in the $106-108 range offers a decent short setup.



Note: I used SSO (leveraged SPY ETF) as my trading vehicle, but am using SPY as the example since more people trade with SPY.

Game Plan and Free Trade Report

Here is my game plan for the rest of the week and free trade report. Watch for the key SPY support levels. A continuation of the down move would setup some nice "oversold bounce" trades.

http://docs.google.com/Doc?id=d5z8q8w_1296ffhsmdfn

September 2, 2009

Note: I will not have access to a computer Thursday and Friday while on vacation, so there will be no Reports or intra-day notes for those two days. The next report will be for the first trading day next week.

Market Notes:

Today's welcome continuation down move (for those of us net short) broke through last week's support zone and sets up a possible move to the next support zone at $98.

If looking to add short positions, look for a weak bounce to former support. If looking to get long, wait until the $98 support zone is reached. This would setup a nice oversold bounce trade, with stochastics reaching oversold conditions.

Trade Tracker:

I am still holding all of my short positions but LMT, though using profit taking strategies to lock in profits and still benefit from a possible down trend.

I took partial profits in AAPL and VPRT. I am still holding SNDA and POT, which are now partial positions after profit taking.

I exited LMT. It has not been cooperating. The fact that it has not participated in the market down move, even with a nice short setup is what got me to give up on the trade.

I was stopped out of my SSO and SPY long partial positions at my entry levels. Profits had been taken earlier at the top of the trading range (see past reports). I am happy with this SPY trade as it allowed me to make some profits while waiting for my short positions to work.

Game Plan:

Keep and eye on index and focus list stocks. Shorts can be added on a weak bounce. Longs can be added on weakness, when SPY reaches support.

If the market continues to drop, keep the "oversold bounce" and "rubber band" setup handy. Look for stochastics that reach below 10, price moving far from resistance and big drops to support.

Keep an eye on key support and resistance levels, along with stochastics. This should make for some easy, slam dunk trades.

Trading Strategy:

While I don't have my full setup, I will have my iphone and will monitor the index ETFs and core focus list stocks. This is a good strategy when away from your usual trading setup or on vacation. SSO and SDS will be the main trading vehicles, with focus list stocks as possibilities.

Speculative Entry: SRS

I took a small positions in SRS today. It is very oversold (meaning real estate is overbought) and, if history is a guide, should bounce soon. I am using a tight stop with a target near the moving average.

Charts: BRE and PALM

I entered two trades today. PALM is a trend pullback setup and BRE is oversold bounce.

Trade: FWLT

As noted in the alert to subscribers yesterday, I entered FWLT at $19.03. The stock is extremely oversold and due for a snapback.

MON Oversold Trade

Chart shows extreme oversold conditions. Entry as close to $70 support line as possible. Tight stop.

Today's Trades: FCX and MON

I made two speculative trades today, short FCX and long MON.

MON is oversold, but still a few points from support. The higher probability setup is to enter long at $70, which I will do if I get stopped out of this trade.

FCX shows a bearish pattern, but has bounced over the 50 day moving average.

Both trades are low risk, but average probability. Obviously I am using tight stops for these trades.

Trade: SDS

I entered 400 shares of SDS today when my buy limit order was hit at $88.15. I don't do this often, but I am using two different stops for this trade. Half the position has a stop just above $78, while the other half is above the 50 day moving average.

The market is very oversold, thus this inverse ETF is overbought and near support levels. I expect a market bounce early this week due to overbought conditions.

Today's Trades: CBI and PNRA

CBI: 200 shares at $11.00

This stock, as with most of my trades, was mentioned in the Trade Report last night. It's holding above both the well formed trading range and the 50 day moving average, providing a low risk, easily managed traded. Stochastics are oversold and turning up.

Risk: My stop is under the 50 day moving average (10.50) and my intitial target is near the recent high in the 13-14 range. This gives me a 5:1 reward to risk ratio.



I also went short 200 shares of PNRA at $47.83. I will post a chart later today.

Trade Setup: USO

As noted yesterday, I entered USO at $28.32.

Setup: Oversold bounce, possible bottom formation. Stochastics are extremely oversold, which has provided for quick counter trend trades with this stock.

Risk: My stop is under price support around $26.50, with the 50 day moving average providing the initial target at $33.50. This gives me a 3:1 reward to risk ratio.

Today's Trade: SSO

I took a small position in SSO today based on the "oversold bounce" or "rubber band" setup. My stop is just below the support line and I will be quick to take any available profits.

Update: I am having trouble with chart annotations and will post chart later today.

Trade: FAS

I went long 200 shares of FAS at $17.63. This is an "oversold bounce setup. This is a low risk trade with a stop just under the support line on the chart. My target is in the $23-25 range. This provides a 3:1 reward to risk ratio.

Today's Trade: DUG

As noted to Trade Report subscribers earlier today, I entered DUG at $21.19.  The inverse oil services ETF is near strong price support and is very oversold (oil is overbought).  I am using this trade to short the oil sector.

Setup: Oversold bounce.  Stockchastics are way oversold.  The last 6 times they reached extreme levels, profitable trades were there for the taking. 

Risk: My stop is in the $19-20.   My initial target is $24-25.  This gives me a 2 or 3:1 reward to risk.