Regarding This Morning’s Weakness

Jun. 03, 2011 3:20 PM ETQQQ, DIA
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Contributor Since 2008

I’m a swing trader of momentum stocks with a holding period of anywhere from a few hours to a few months. I run a number of screens to locate the strongest/weakest stocks out there, using technical analysis to determine my entries and exits. Trying to calculate the intrinsic value of stocks in my opinion is out of date and there is wisdom in crowds.I've developed a market timing system that determines when it's best to be long, short or on the sidelines, using a number of proprietary indicators based on many time frames. I believe that to have longevity in this field one must find ways to calm the mind and trade from a detached point of view. Emotionless trading will allow you to respond to what's going on right now in the markets, rather than reacting to daily fluctuations.View my personal blog

I find it worth noting that both the Dow and the Nasdaq have bounced off of key support levels this morning that I had previously drawn on my charts. Using that knowledge in the context of my timing signal, it’s not safe to buy the dip as I would wait to see if this bounce can materialize and last longer than 1 day. Right now the test of previous lows has succeeded, but that’s not to say by the end of the day the market’s selling couldn’t accelerate.

I was right to trust my instincts and not buy my most recent timing signal as it saved me a very painful trading day. We also could be witness a key psychological reversal take place. Before when my signal would issue a sell signal it would fail as the dip buyers would push the market higher and all buy signals were meet with a flood of buy orders. This is significantly different behaviour when traders are unwilling to buy stocks when a long signal occurs.

Logic tells me we’re going to see the March lows before the May highs.


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