Will The Bounce Last?
Unless some dramatic changes set in, the best strategy looks to be seeking out short entries on prudent setups.
Good morning, Minyans,
The market is bouncing in the early going and pundits will point to Hewlett-Packard (HPQ) earnings as the spark. This may be the case, but the fact remains that we are extremely oversold and it isn't surprising to see us bouncing after yesterday's ugly action and nasty close.
Unfortunately, this is not the sort of action that inspires confidence: rather, a tradable bottom comes typically after some big intra-day whoosh down at which time all stubborn longs throw in the towel, stocks crater and then value shoppers go to work. We saw this on August 16, as well as on March 14. It isn't completely out of the question that we can see a sustained move from here as anything is possible and we should remain flexible and open-minded, but early strength begs to be sold and I am sure will be used as a way for trapped longs to lighten up. Once we see a dip set in, the true character of today's market can be evaluated and we'll quickly see if buyers want anything to do with the tape.
Even if we see a sustained bounce the problem in playing it is the lack of underlying charts that look worthy of freshly protected capital. For every InterContinental Exchange (ICE) breakout, there are five Guess? (GES) breakdowns.
Unless some dramatic changes set in, the best strategy looks to be seeking out short entries on prudent setups. Target (TGT) will be out with earnings any moment and should set the tone for the retail sector. Regardless of what the company says, the sector is damaged and in trouble and is currently one of the short sellers' playgrounds. As mentioned above, I like Guess on a push through yesterday's low as well as Best Buy (BBY) through $45.80 with a stop over $48.00.
Patience continues to be the key here: Let the action settle down and don't feel forced into doing anything. The market is acting very poor and capital preservation is my Number One priority.
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