“Whenever the market does not act right or in the way it should, that is reason enough for you to change your opinion and change it immediately. Markets are never wrong, but opinions often are” –Jesse Livermore
Last Friday the U. S. market initially embraced a benign Non-farm Job Report in the morning, but then it turned South in a hurry. SPX, NASDAQ, and numerous leaders including GOOG and MA all closed at their session lows on volume despite the Dow finishing in green. AAPL continued its multi-day losing streak and finished below its 50-day moving average 656 with the closing price at 652.59 on very heavy volume.
It’s interesting to see how rotation has been playing a big role to keep this rally going, and meanwhile, some leaders constantly showed suspicious price action when churning around with whipsawing sessions. Such behavior usually indicated uncertainty. With many companies issuing earning warnings and the new earning season kicking off next week by AA, wild action should be expected.
Unless you’re a fund manager who might be able to afford to buy and hold, we, as individual traders, should act upon when things became cautious. But we do have advantage over big guys by trading stocks actively to catch big swings on some stocks.
AAPL is such an example being a great trading vehicle once we learned how to take advantage of its big moves. Exactly two weeks ago when I pointed out its bearish close at 700 on heavy volume vs. GOOG’s much stronger chart, AAPL has been in a downtrend from its year high 705 before closing at its ten-day low. During its downside moves, it has had wild up-and-down swings of 20 plus points in every two sessions, but also nice trading opportunities for us vs. buy and hold.
When AAPL gapped down on volume Friday morning while market gapped up, in addition to its bearish close Thursday, it gave me a good idea for a shorting opportunity, and it worked out really well. Remember: Stocks can go down faster than go up. Just look at the crazy daily charts of CMG and QCOR …
After days of sell off, a stock could bounce off hard as if a big splash occurs by the heavy water fall. Violent moves usually happen. It’s why it’s prudent not to hold big short position over the weekend. On AAPL daily chart, I’m looking at 635-645 for an oversold bounce as that area is near 38.2% fib retracement of 637 from May low to Sept. high, and also near its April high of 644 as a potential support.
On GOOG daily chart, it just had another bearish shooting bar on heavier volume reversing from its fresh new high as it closed at$767.65 near the day low of 765. To me, it should be a confirmed SELL signal for short-term. Chasing here would mean tremendous risk. Breaking its bearish rising pennant is expected.
Market can be wild and volatile, especially when triggered by HFT; thus, we should be careful with trading size and the entry levels while taking advantage of the price swings. Always be calm and act upon while waiting for good trading opportunities. Having a trading plan and cutting loss quickly can also help!
Here are my AAPL two-day-5-min intraday chart and GOOG daily chart with notes:
Trade safe and well, and thanks for viewing!