This Stock Pattern Is Better For Day Trading A Flat Market

Posted 9:30 ET AM - The market is trapped in a very tight range and trading volumes are half of their average level. We are in the summer doldrums and there is no news to drive the market. Even last week's FOMC minutes did not generate interest. Trading volumes will not return for another two weeks. Flash PMI's will be released tomorrow. They are not very significant now that China does not post its numbers. Janet Yellen will speak in Jackson Hole later this week. Employment conditions are improving and Brexit was a non-event. There is room for a rate hike this week and a San Francisco Fed official said that every meeting this year is "in play". Consequently any Fed Speak has the potential to spook investors. Earnings season is winding down and the results were okay. As long as the SPY is above $217.50, I am day trading from the long side. That is a minor support level and I am leaning on it. I am much more inclined to buy stocks that have tanked, formed a base, compressed and that are breaking through horizontal resistance on good volume. These stocks have lots of upside and they don't need a market tailwind. Stocks that are breaking out to a new high often surge on the opening bell. The momentum fades and these stocks give up gains easily. Try to avoid this trap. Know that these stocks need help from the market to move higher. The only way to trade them is on a pullback and a compression. Make sure that the market is not moving lower when you do enter the trade. I would highly discourage any overnights on these stocks. If the market rolls over they will easily give up gains and you will be left holding the bag. I look for shorts each day and I am searching for relative weakness. When the number of attractive shorts increases, a market decline will be close at hand. August and September are historically weak months. Option implied volatilities are at historic lows and the likelihood of a small correction is high. Day trade early in the day and set passive targets. Trim your size and reduce your trade count. Don't piss your capital away in this low probability environment. Conditions will improve in two weeks and we will be ready to strike hard. . .

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