Trading Rules Collection: Bearly Anything to Buy

Posted on May 7, 2012 by Jan Arps' Traders' Toolbox

Hawk’s Scan Sentry Report May 7

As I look at the June S&P futures contract (eMini) I notice that since it started trading regularly in early March, the base of it’s early accumulation occurred at a price around 1360. Friday’s close of $1362.50 was very close to this significant support level. If it trades much lower than that level, then pretty much every long position on the March contract is losing money. That should add to the ‘fear factor’ of the current market. The contract’s high was around 1415 several weeks ago. “Sell in May and walk away”… that’s what they say. Well, they didn’t waste any time selling. It looks to me like the selling started promptly on May Day and didn’t stop all of last week. It took only one week to trade from near the contract high (1415) to the contract low.

So how do we make money in this type of market? It looks to me like there is a lot of money going into Treasury bonds right now, so you could follow that crowd. But there is not a lot of return there. If you want to trade stocks this is what I would do. First be willing and able to sell short…. after all, the market goes in both directions and we need to be able to make money either way. Remember, the market generally goes down a lot more rapidly than it goes up, so don’t chase shorts. If you do trade long, make some quick money and get out. It’s best to filter your long trades to stocks that are in the strongest sectors which at this time appear to be home builders, utilities, and consumer staples. Unless you are a trend trader don’t expect to hold any trades more than a few days. It is important to note that the amount of risk you expose yourself to in the markets can be measured by time as well as by dollars. I am going to be monitoring each day’s sentiment and day-trading in that direction for quick (and little) profits or losses.

As I scan my universe of nearly 7000 stock symbols with my Scan Sentry Toolkit I notice that there are exponentially more short set-ups this week than long. Below you will find a few of the stocks that are on my watch-list for the early part of this week, and some of the reasons I am monitoring them. For an explanation of the indicators on the charts below please follow this link.

_____Longs_____

HAIN

( One of the few stocks left with a bullish Triple Trender. This one broke to new highs with a Pullback 23 signal while the rest of the market was tanking.)

(Another bullish breakout with a Pullback 23 signal and a bullish Triple Trender. )

_____Shorts_____

LAMR

(Here is a bearish Pullback 23 coinciding with a Trend Exhaustion Overbought signal and a Trendline Breakdown signal. Also Radar1 Fear/Greed indicates very few buyers at this time. )

LINTA

(After the first pullback into a bearish Triple Trender we get a Pullback 23 signal. Also note the very weak buying enthusiasm indicated by Radar1 Fear/Greed.)