Knuckleballer On The Mound

Yesterday's gap and fade open followed by another down day for the indexes gave little opportunity for investors to make profits unless they were patient and selective. Many of the stocks on my list of set ups, like the airlines, failed to pop and many early gainers were designed to make you swing at a pitch in the dirt.

The investment community is now back to work and so far the market is very skittish as it works off it's overbought condition and some group rotation occurs. My trading thesis is to fade any gap ups, have patience, be selective in waiting for my pitch and take my profits quickly.

For example, SCTY was up huge at the open after Goldman Sachs upgraded the stock to a "conviction buy." and raised the price target to $80.00. SCTY appeared to be breaking out. But it then proceeded to fade with the market averages. The key to buying a gap up stock like SCTY is to wait for the market fade to end and to then wait for the stock to reverse back up. In the case of SCTY, the stock never came back and faded all day. Hence, the wise play was to not buy SCTY. Plus it did not breakout on a closing basis.

And after gapping up, the market ended on a low despite the half hearted attempt to bounce during the day. I'll use the Dow Jones Industrials as an example because I can't get my hands on the more accurate S&P 500 tic chart. I also watch the NASDAQ 100 tic chart along with.

 

 

I did buy some selected special situations, such as WDAY which broke out from a beautiful base to an all time high. But I played small and will sell faster than I would typically do until this market begins to sort itself out.

That means that I will sell my CSIQ on today's gap up open and then look to buy it back hopefully on a pull back. I also will sell the GOOG I purchased and try not to regret the stocks like BABY that I passed on because of the erratic nature of the day. Until things settle down into a pattern, it is strictly a traders market for me. Lastly, that means that I may buy stocks like GOOG right back later in the day taking whatever the market gives me.


 

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