How to Trade Tomorrow - My Thoughts

“To do Well in Short-Term Trading, it Takes Full-Time Attention and Dedication; It Takes Considerable Amount of Self-control to Trade Well” – Gerald Loeb

First of all, thank many of you for reading my last post with objective comments! I also appreciate the feed backs from the ones who told me about their positive experience owning Samsung phones.

After an unexpected two-extra-day long weekend due to Hurricane Sandy, we will be able to trade again Wednesday or tomorrow although it may not be a very normal trading session.

I sincerely wish that people in the affected area by Sandy could go back to normal life first before thinking abut trading. I like what Suzy Oman says: “People First, Then Money.” 

On Twitter, I can sense mixed emotions from people’s tweets in my stream: excitement, anxiety, puzzle, or calm.

In my previous post, I mentioned there was rotation going on: some beaten down tech stocks closed at the session highs on high volume or closed well off their recent lows, such as AMZN, EXPE, PCLN, MNST, CMG, etc; meanwhile, some other stocks got sold off from recent highs on strong volume seen in REGN, FB, YELP, etc.

Overall, there are very few stocks with good setups either to go short or long.

But there are some positive signs worth mentioning:

• We are oversold while holding in the consolidation area for a few days; chasing performance could drive buying in equities; corporate buying has picked up according to some liquidity research I follow; oversold tech stocks look ready to turn around some; the put/call ratio has moved up, a contrarian sign against more downside.

In a mixed market like this, I would choose to trade SPY which presents the direction of broad market. In its consolidation area, SPY is swinging between 140.39 – 142.28. I usually like to get in to long at near its low trading range for cushion. But it’s better to let its price action tell me when to get in by following its intraday chart tomorrow.

Testing its 100-day line of 139.97 is possible, but if SPY breaks out the current trading range and closes above 142.3, I’ll plan to hold for a few days as a swing trade. Closing below the range means I would be stopped out of my long position. Shorting here at oversold condition seems more risky to me.

I usually follow a few trading rules when trading SPY (or other stocks):

• Be patient and wait for the fist thirty minutes to let it settle down by electronic trading with likely wild swing at market open.
• Initiate a position with smaller size with tight stops if I see a nice setup on its intraday chart; add if the trade works out.
• Hold position longer if SPY can break out of its trading range up to its lower line of the rising wedge at 142.3 to 143+. But tomorrow could be a light trading volume day to provide little support for any directions. (Please check my SPY daily chart posted in my last blog or on StockTwits.com under my handle: z8angela.)

Other candidates for trading on long side are: AAPL, AMZN, MA, WYNN, but I usually like to wait for setups on their intraday charts before entering.

Will AAPL gap down on the news about its top executives departure? If so, I expect some wild action with potential dip buying opportunity.

But make sure, be discipline and be flexible! Best luck on trading tomorrow!

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