How to Trade During Market Selloffs and the Power of Support

The one key element for traders looking to "buy the dip" is support. Support levels are powerful because this is the level where we see buying interest due to previous buying, trend lines or moving averages.

Even during market selloffs where the drop seems to have no floor, support can have a powerful impact. Let's study these momentum stocks during the current selloff. Notice that all of these bounced at previous lows or key moving averages. 

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Remember, we are always trying to make the complex simple, and nothing is simpler than buying at support levels.

SPY bounces off October '14 low

GOOGL bounces off pre-earnings breakout gap level

CMG bounces off 200 dma

UA bounces off 200 dma

These charts are great examples of the power of support and how to trade during market selloffs.

Next week I will present a webinar on swing trading and handling market selloffs. Keep your eyes peeled for info from www.bullsonwallstreet.com

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21 profitable stock trading setups and the optimal conditions to trade them

Most full-time traders have a basket of "goto" setups that they trade repeatedly. Some do so mindlessly, irrespective of market conditions. You can make money this way, but you will not become wealthy.

The best traders optimize their trading by deploying the right setup for the right market. For instance, a "trading range" setup is highly profitable in choppy, rangebound markets. Just don't expect it to make you money in a parabolic momentum market.
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Here are some of my favorite setups and the best conditions to trade that setup:

1. Trend pullback: trending markets that successfully tag key moving average support
2. Bottoming formation: downtrending markets forming a base
3. Rubber band short: parabolic markets nearing resistance showing signs of weakening
4. Rubber band bounce: parabolic downtrending markets near major support levels
5. RSI divergence shorts: market near highs but showing weakening overall breadth
6. RSI divergence longs: markets near lows but showing strengthening overall breadth
7. Breakouts: earnings season in an up trending market
8. Breakout pullbacks: trending and rangebound markets, avoid downtrending markets
9. Breakdown shorts: downtrending, rangebound and stalling trending markets
10. Trading range bounce: rangebound and trending markets
11. Trading range short: rangebound and downtrending markets.
12. Breakout failure: Downtrending markets that are bouncing, or stalling at highs.
13. Breakdown failure: momentum markets
14. Remounts: any market
15. Earnings Breakouts: Any market
16. Head and shoulders short: Extending markets showing negative volume patterns
17. Double Top short: Extended markets showing negative volume patterns
18. Earnings Breakdowns: Downtrending markets
19. Moving average bounce: any market for small bounces, trending markets for sustained bounces
20. Pre (anticipatory) breakouts: Trending markets
21. Dead cat bounce: down trending markets, rangebound markets

All of these setups will allow you to keep up with or slightly "beat the market". However, if you want to make serious money in the trading game you must deploy these setups under optimal market conditions.

If you would like to learn more about how I trade, receive my nightly focus list with market analysis,setups and trade alerts, sign up for a 14 day free trial at BullsonWallStreet.com.  

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You need to know this fundamental change in oil's character

Swing Traders focus on two key elements when assessing a stock's trend, volume and price action.  Volume often precedes price action as the big players leave footprints that are tough to hide.

During oil's parabolic downtrend, volume has consistently shown a distribution pattern while basing before it's next leg down.  However, the current volume pattern has changed the character of the oil ETF, USO.

Notice that the current basing range over the past 8 trading sessions, we see increased volume.  Not only has there been an influx of volume, the pattern shows positive accumulation, as upside volume clearly outpaces negative volume.

This often occurs before a strong bounce or change in trend.  When I see this type of clear change in character, I start accumulating.  I already have a position in oil and may look to add some more.

If you would like to learn more about how I trade, receive my nightly focus list with market analysis,setups and trade alerts, sign up for a 14 day free trial at BullsonWallStreet.com.  

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