Correction, or Worse?

Good day Triad Traders. Today we are seeing what may, or may not be a correction in the markets. The Dow fell by 400 points today which was up from an intra-day low of over 546 points, the worst day since the first trading day after 9/11. This pullback has been mentioned by the talking heads for some time and the Bearish action in the Chinese markets, along with Bearish Durable Goods info was the catalyst to send the markets tumbling.

You may remember at our meeting I mentioned, "you take a stairway to the top, but you jump out the window." Basically, when a selloff like this occurs, it could be good, or it could be bad. We have to look at the charts to give us some idea what is happening. Let's look at the 5-Year Dow:

(Click on the picture to enlarge, use the browser "back" button to return to the blog.)

You'll notice that the index broke out of a pretty good Ascending Channel to create two new ones. You'll also notice that the newest channel is much shallower than the last, indicating the market may be running out of steam.

Now let's take a much closer, and shorter term look at the Dow:
WOW, that is some leap, eh?

So what does this all mean? Well, it could mean tremendous opportunities have presented themselves to us. Remember yesterday I mentioned that a stock does not necessarily reflect the strength of a company. There were a lot of good companies that got hammered today because "those boats sank with the outgoing tide." Now, I am not suggesting that this downturn is a "one and done" day. It could be the start of a correction which means more downside. It could also mean the start of a Bearish Market. As Traders, we don't care because we can make money in ANY market conditions.

The NASDAQ had quite a fall today too. Let's look at the charts, first the 5-Year:As you can see, the index was very close to the top of a major Ascending Channel and has now begun to fall. How far and how fast remains to be seen, but look at what today's action did to the previous trend:If the index drops below $2,400, we are talking a potential trend reversal. Of course, we need to see the index make a lower high and fall off to be sure, but it has the makings of a potential reversal. The $COMPQ also broke two MA's today, the 30 Day and the 100 Day. If it breaks the 200 Day, watch out!

Now, as mentioned before, there may be some GOLDEN buying opportunities coming up as some of my favorite stocks got popped today, so I may be looking for a move to their support lines, then bounces to move into some poistions. I'll give you some names, but I'll leave the charting up to you. BHP, CLF, EXP, FCX, NAVZ, TDW...(these are NOT recommendations) to name a few.

By the way, if you are looking for a way to play the Bearish side of the market but are afraid of shorting or using options, you can consider the QID, which is Bearish ETF for the NASDAQ.

Happy Trading!

And We're Off and Running!

Last night, the Central NC Traders Group (a.k.a. Triad Traders) of INVESTools held its second meeting in Jamestown. The meeting was attended by about 12 members. It was a very productive meeting as it introduced the group to new members and new ideas.

This blog will serve as a gathering point in which we can all share experiences, trading ideas, trading strategies and so on. The only DUMB QUESTION, is the one that IS NOT ASKED! So ask away!

To add your ideas, just post a COMMENT (the bottom right link on any post) the most recents ones are better and I'll try to put up charts on stocks the members are looking at so we can all review them together. Check this blog often!

As a parting idea, here are my "Trading Rules." (These are not Strategy Rules)

Iron Condor Asset Management - Trading Rules

"The Rules are the Rules because they are THE RULES."

1. Patience
2. Discipline
3. The Trend is my Friend until it Ends
4. Plan every trade, trade every plan
5. Maximize Profits
6. Minimize Losses (1% max/trade, 6% max/month)
   
7. Every trade must have a stop-loss in place
8. When a trade moves in my favor, move my stop loss up to capture profits
9. All trades must be ready to play by 9:30 AM
10. When possible, clear all trades through INVESTools Hotline
11. Maintain trading journals for all trades including chat transcript, and opening and closing charts.

"Focus on trading well, and the results will speak for themselves."

Happy Trading!