In my last post I mentioned that there were signs of a potential short term bottom in place. More of those signs came on Friday, at least as far as I am concerned. While I also mentioned that I didn't plan to recommend many bullish trades in this downtrend, I think now may be a good opportunity to get a bit aggressive. I have ignored the last 3 or 4 oversold readings in the short term indicator, but this one looks better.
Both NYSE and Nasdaq had very heavy volume today. Volume was heavier in the Nasdaq than at the March bottom and only a bit lower than a few days in January and last August which were very high fear sell offs. Also the volume on DXD, which is the 2X inverse fund of the Dow/DIA, spiked to its highest level since the inception of the fund. I believe these are indications of a short term climax bottom.
The Nasdaq and QQQQ ETF nearly completely filled a large open gap up from April that I had mentioned a couple months back. Then price reversed intraday to close near the open to form a hammer/doji candle stick. These three factors (gap retracement, high volume, reversal candle) create what I think is a good bullish set-up.
I suggest purchasing QLD on Monday at a limit price of 75.50. While I haven't suggested specific stops on past trades I would definitely place one on this trade. 71.00 may be a good stop level that could allow a little more downside but keeps the risk within reason.
Also, move the stop on SRS up to 92.00.
Pete
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