There Is Money To Be Made – Relative Strength Gives Us A Huge Edge

Posted 9:30 AM ET - Stocks traded in a very narrow range for most of the day Thursday. In the afternoon credit concerns surfaced and the first hour low was breached easily. A number of hedge funds have pulled money out of Deutsche Bank and this rattled the market. Traders are searching for anything they can sink their teeth into and once the momentum was established, stocks dropped quickly. The reaction to the news was over-extended and the market found support. We are seeing some follow-through buying this morning on the open. In my comments yesterday I outlined my day trading approach. Please go back and read those comments. The market is searching for direction and the price action is random. I think it would be fruitful for me to describe how I traded yesterday. Stocks opened lower so I favored the upside early. Down opens have been much easier to trade and cyclical stocks were popping up on my scanner. The price action was tight and slow so I entered long positions and set passive targets. I was chipping away throughout the day and many small gains were starting to add up. In my chat room I preach this constantly, "Market First, Market First, Market First". You always have to keep one eye on the market when you're day trading stocks. I had a number of long positions on when the market breached the first hour low. I told chat room members that I was exiting my long positions immediately and these stocks were holding up relatively well. I made money on those trades and I went to the sidelines. I don't watch any news reports and I don't subscribe to any news feeds. I trade in a vacuum and the only information I need is price movement. I knew there was strong selling and I had to watch patiently. During the decline the strongest stocks that I had been trading drifter lower. They were holding up relatively well and they were compressing. I knew that as soon as the market stopped going down they would release. Market support was established and I quickly scooped these stocks. They released and I made the lion's share of my money in the afternoon. This is a tough market environment and you need to be patient. Always keep an eye on the market and set passive targets. Use the first hour range as your guide. If we are above it, focus on the long side. If we are below it, focus on the short side. If we are in the range, favor the long side and set passive targets. We have been making excellent money trading biotech stocks and I think they've run their course. I'm seeing rotation into energy, chemicals and other cyclicals. The price action today should be relatively choppy. Up opens have been harder to trade so I will be very patient during the first hour. Ideally we will get a small pullback and that will reveal the strongest stocks. I want to trade from the long side. . .

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