A brutal day on Friday if you had any kind of position long in the markets. I, fortunately, was flat so I did not get hit except for a small day trade strategy that did not work out.
I did, however, start positioning for mean reversion trades long. I bought 5 stock positions at the end of the day on Friday and will be looking to add a bit more today. These are not breakout trades and also are not swing trades per se. They are mean reversion trades that tend to get put on when all seems lost.
I am edging into these as we are not at extremes yet. These mean reversion trades are not for beginning traders. But if you want to get involved with them you can trade them at about 1/4 your usual trading size until you know what you are dealing with. The swings can be extreme on these as there are no stops except time-based stops. That means position sizing is mandatory.
As I am writing this the markets look to gap down almost 1%. The first thing I plan to do after the open is an attempt to determine the chances of a trend day down. I do not want to buy shortly after the open and stare at a big move all day to the downside. You can never be certain however but there are plenty of clues available. $ADD is one of them. Any reading >-1000 will put it in the potential trend day category. >1500 and longs are not advised at least during the morning part of the trading day.
Not much new news however after Friday’s big event. The bank of Japan is in a closed door meeting right now as I suppose are other governments. I would not be surprised to see rumors of more stimulus being announced anytime. In addition, I doubt very much the esteemed members of the Federal Reserve will be touting rate hikes. At least for the next few weeks. But one never knows when you have a group as flakey as they are.
These events make trading via a swing trade very interesting. When there is panic in the air markets tend to overreact. And this time, should be no exception. I have my list of stocks to consider buying today and unless we get some big change I will be adding to the mean reversion trades sometime during the day. This is not set in stone!
One thing I might mention that most of you most likely know by now. Most of what you read about the exit of the UK and the effect it may or may not have is driven by interest groups. I would say 95% of it is spin. So take with a grain of salt what you read from almost anywhere.
It’s this time that you should have several advisors that are objective and sharp to get some insights in what to do now. Unless you’re a seasoned market expert do not try to figure it out by yourself. The news and human emotion will prevent you from making good decisions.
I went through the worst I have seen for a swing trade when I was on vacation in Hawaii a number of years ago and the US debt rating was downgraded on a Friday after the close (great timing)
I was positioned long (too much so) and had to wait until Monday morning to figure out my strategy. When the market opened down much less than I anticipated I sold everything. This turned out to be a great decision as the meltdown was brutal. This so far is not even close to that situation. I will be sure to mention when I think we have that kind of downside risk. But so far this looks like an excellent trading opportunity.
If you wish to follow my swing trade your can go to my private twitter feed @rickjswings. It is free for now and does not anticipate that changing anytime soon.
Also please notice I put up #2 in my top ten trading sites. I will do a write up on this site today or tomorrow. These sites I list are the premier of the thousands of sites that a trader is exposed to on the internet. Also, let me mention that the rating only has to do with the free information the site puts out. Anything the sites charge for is not included in this rating. In the future, I will post who I feel are the top 10 fee-based sites.
Good Luck Today
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