AM: Sanity returns

AM Update

MARKET BEHAVIOR
Stocks opened modestly lower, but are stable as the selling is contained, at least for the moment.

MARKET SENTIMENT
The market is quite because no one is doing anything.  We ran out of new sellers, so we stopped falling.  Prospective buyers are nervous and staying on the sidelines.  And holders keep holding.  All that adds up to a flat market, but this is good given the size of the reversal a couple of days ago and the turmoil in Japan.

TRADING OPPORTUNITIES
Expected Outcome:
Spooked markets often succumbs to an emotional reaction of sell first, ask questions later.  The sideways trade over the last two days gives people the opportunity to evaluate conditions and make deliberate and rational decisions.  This is always good for market stability.  We could slip a little more before this is all done, but contained selling today and on Monday means the rally is still strong and the dip is buyable.  This turmoil is bullish because it flushed out many weak kneed traders, taking much of the supply out of the market.  Those that bought in the face of this drama are more confident and willing to hold through further weakness, ironically making further weakness less likely.

Alternate Outcome:
Dip buying can prop up a market for a couple of days, but without real money standing behind it, the slide will resume.  Remain cautious around this market for the next couple days, but if we don’t breakdown soon, the selling exhausted itself.  The next key to watch is how the market bounces.  Stalling short of the previous high shows the supply of buyers is drying up and is finally creating an interesting shorting opportunity.

Trading Plan:
Support above 1635 is encouraging and this stability is more conducive to a bounce than further selling.  We don’t always need to have trades on, so if someone is nervous, take a break and wait for the next trade.  It is easy to make money in the markets, the hard part is keeping it.  Staying out of the market when we don’t feel comfortable is one of the best ways to stop giving back our hard-earned profits.  A lot can happen over the weekend, but sanity is returning.  Buying with a stop under 1635 is an interesting entry for those with an itchy trigger finger.

INDIVIDUAL STOCKS
AAPL  continues holding the 50dma.  This is a positive change in character as holders keep holding and buying is coming from more than just speculative dip-buyers.  Personally I don’t think the bottom is in yet, but we trade what we are given and right now the stock is acting well.  But remember this is a trading stock now, so buy weakness and sell strength.

Recent volatility hit stocks like LNKD, AMZN, and NFLX.  It shouldn’t surprise anyone high-beta, speculative trades fall the most during market uncertainty.  Take profits and use stops to keep from giving back all those hard-earned gains.

Plan your trade; trade your plan