Market can quickly surprise you if you are not ready | stockbee

10/09/2014

Market can quickly surprise you if you are not ready



Familiar pattern of Fed induced bounce in play. Every Time people become too negative and predicting big drop, the pattern repeats. Fed makes dovish statement or changes policy and we are back to rally mode.

The backdrop to the bounce was extremely weak breadth, so chances of further follow through for at least few days or weeks are good. The only problems with many of these recent bounces is extremely narrow number of stocks leading the action.

From swing trading point of view both pullbacks and momentum burst kind of setups are likely to work if more buying comes in. Which should give swing traders lot more to work with. 

As we have seen again and again in these V shaped bounces, many of the beaten down stocks make bigger moves than those that held up well. There is more pronounced mean reversion effect in play during such bounces.

The quick bounce also is cautionary tale for those who take the eyes of the ball during such corrections. Market can quickly surprise you if you are not ready. 

Earnings season has started so I will be looking for earnings Episodic Pivots. They offer the best bang for buck during the season. One or two big earnings trade can potentially make your year. 


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